Question

For Waterway Industries, the predetermined overhead rate is 70% of direct labor cost. During the month, $400000 of factory labor costs are incurred of which $140000 is indirect labor. Actual overhead incurred was $230000. The amount of overhead debited to Work in Process Inventory should be:

Answer 1

Answer:

$182,000

Explanation:

Given that,

Factory labor costs = $400,000

Indirect labor = $140,000

Predetermined overhead rate = 70% of direct labor cost

Actual overhead incurred = $230,000

Amount of overhead debited to Work in Process Inventory:

= (Factory labor costs - Indirect labor) × Overhead rate

= ($400,000 - $140,000) × 70%

= $260,000 × 70%

= $182,000

Therefore, the amount of overhead debited to Work in Process Inventory should be $182,000.