Factory Overhead Rate, Entry for Applying Factory Overhead, and Factory Overhead
ID: 2490058 • Letter: F
Question
Factory Overhead Rate, Entry for Applying Factory Overhead, and Factory Overhead Account Balance The chief cost accountant for Sassy Beverage Co. estimated that total factory overhead cost for the Blending Department for the coming fiscal year beginning June 1 would be $97,500, and total direct labor costs would be $75,000. During June, the actual direct labor cost totaled $6,300, and factory overhead cost incurred totaled $8,250.a. What is the predetermined factory overhead rate based on direct labor cost? Enter your answer as a whole percent not in decimals.
Explanation / Answer
Answer:
Predetermined overhead rate is the rate of applying factory overheads to a product or a job and always computed before the start of the year.It is computed by dividing factory overheads with a particular cost driver.
According to the question, The cost driver is direct labor cost.
Predetermined factory overhead rate = (Estimated factory overhead cost / Estimated direct labor cost)*100
= ($97500/$75000)*100
= $1.30*100
= 130%
The above % means for every $1 direct labor cost, there is $1.30 factory overheads for that particular product.
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