Question

Calculate and Use Overhead Rate Chipman Corporation expects to incur $300,000 of factory overhead and $500,000 of general and administrative costs next year. Direct labor costs at $25 per hour are expected to total $500,000. If factory overhead is to be applied per direct labor hour, how much overhead will be applied to a job incurring 100 hours of direct labor

Answer 1

Answer:

$1,500

Explanation:

Given that;

Factory overhead = $300,000

General and administrative costs= $500,000

Direct labor cost = $500,000

Total direct labor hours = $500,000 /$25 per hour

= 20,000 direct labor hours

Factory overheads per direct labor hours = $300,000 / 20,000

= $15 per direct labor hour

Therefore, Overheads applied to job will be;

= 100 direct labor hours × $15 per direct labor hour

= $1,500

Overhead applied is $1,500