Diamond Company and Client Company assign manufacturing overhead to Work in Process Inventory using direct labor cost. The following information is available for the companies for the year:
Diamond Company Client Company
Actual direct labor cost $ 200,000 $ 112,500
Estimated direct labor cost $187,500 $ 125,000
Actual manufacturing overhead cost $ 72,500 $ 95,000
Estimated manufacturing overhead cost $75,000 $100,000
- Compute the predetermined overhead rate for each company.
- Determine the amount of overhead cost that would be applied to Work in Process Inventory for each company.
- Compute the amount of overapplied or underapplied manufacturing overhead cost for each company.
Answer Diamond Company Predetermined overhead rate = 40% of Direct labor cost Amount of overhead cost... View the full answer
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Compute the predetermined overhead rate for each company. Diamond company's predetermined rate = 75,000 / 187,500 = 0.40 or... View the full answer