Question

"For Adams Company, the predetermined overhead rate is 70% of direct labor cost. During the month, $54,000 of factory labor costs are incurred, of which $16,000 is indirect labor. Actual overhead incurred was $30,900. What amount of overhead should be debited to the Work in Process Inventory account?"

Answer 1

Answer:

Overhead of $26,600 should be debited to the Work in Process Inventory account.

Explanation:

Predetermined overhead rate = 70% of direct labor cost

Direct labor cost = Total factory labor cost - Indirect labor cost

Direct labor cost = $54,000 - $16,000 = $38,000

Overhead cost allocated to work in process = $38,000 x 70%

Overhead cost allocated to work in process = $26,600

Overhead of $26,600 should be debited to the Work in Process Inventory account.