Question

Using the following accounts and a predetermined overhead rate of 50% of direct labor cost, determine the amount of applied overhead.
Work in Process Inventory
Beginning WIP 23,000
Direct materials 69,000
Direct labor ?
Applied overhead ?
To finished goods ?
Ending WIP 47,220
Finished Goods Inventory
Beginning FG 6,400
169,280
Ending FG

Answer 1

Answer:

The amount of applied overhead is $41,500

Explanation:

Given,

Beginning WIP -$ 23,000  

Direct materials - $69,000

Ending WIP - $ 47,220

Beginning FG - $6,400

Ending FG - $169,280

By using the above information, it is easy to calculate the direct labor. Through which , the computation of applied overhead become easy.

The formula for computing direct labor is as follows:

1.50 × Direct labor + Beginning WIP + Direct materials = Ending WIP + Ending FG

1.50 × Direct labor + $ 23,000  +$69,000  = $ 47,220 + $169,280

1.50 × Direct labor + $ 92,000 = $ 216,500

1.50 × Direct labor = $ 216,500 - $ 92,000

1.50 × Direct labor  = $124,500

Direct labor = $124,500 ÷ 1.50

Direct labor = $83,000

Thus, the direct labor is $83,000

The predetermined overhead rate of 50% of direct labor cost.

So,  

Predetermined overhead rate = $83,000 × 50%

                                                  = $41,500

Thus, the amount of applied overhead is $41,500.

Note : Since ,the predetermined overhead rate of 50% of direct labor cost so we assume ( 1+0.50) 1.50 of direct labor because it is easy to calculate the predetermined overhead rate.