Question

MC Qu. 113 Kayak Company uses a job order costing... Kayak Company uses a job order costing system and allocates its overhead on the basis of direct labor costs. Kayak Company's production costs for the year were: direct labor, $35,000; direct materials, $55,000; and factory overhead applied $6,500. The overhead application rate was:

Answer 1

Answer:

$0.19 per direct labor hour

Explanation:

It is important to keep in mind the following :

Overhead application rate = Budgeted Overheads ÷ Budgeted Activity

also,

Applied Overheads = Overhead application rate x Actual Activity

Using the formula :

Applied Overheads = Overhead application rate x Actual Activity

hence,

Overhead application rate = Applied Overheads ÷ Actual Activity

therefore,

Overhead application rate = $6,500 ÷ $35,000

                                            = $0.185 or $0.19 per direct labor hour