Question

Lowden Company has a predetermined overhead rate of 163% and allocates overhead based on direct material cost. During the current period, direct labor cost is $64,000 and direct materials cost is $76,000. How much overhead cost should Lowden Company should apply in the current period?

Answer 1

Answer:

$123,880

Explanation:

Data provided in the question:

Predetermined overhead rate = 163%

Direct labor cost = $64,000

Direct materials cost = $76,000

Now,

Basis of allocation of overhead = Direct material cost

or

Basis of allocation of overhead = $76,000

also,

Overhead in the current period

= Basis of allocation of overhead × Predetermined overhead rate

= $76,000 × 163%

= $76,000 × 1.63

= $123,880