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The Work-in-Process inventory account of a manufacturing firm shows a balance of $3,180 at the end of an accounting period. The job cost sheets of two uncompleted jobs show charges of $520 and $320 for materials, and charges of $420 and $620 for direct labor.
1. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of __________.

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Answer:

125%

Explanation:

The computation of overhead rate and percentage of direct labor costs is given below:-

The Predetermined rate is

= (Manufacturing Overhead ÷ total number of direct labor) × 100

where,

Overhead manufacturing

= $3,180 - ($520 + $320 + $420 + $620)

= $3,180 - $1,880

= $1,300

And, The total number of direct labor

= $420 + $620

= $1,040

So, the Predetermined rate

= ($1,300 ÷ $1,040) × 100

= 125%

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