This is the right answer, but I do not understand how to get 540. Please explain

Question

This is the right answer, but I do not understand how to get 540. Please explain if you could.

Knowledge Check 02 Dream House Builders, Inc. applies overhead by linking it to direct labor. At the start of the current period, management predicts total direct labor costs of $100,000 and total overhead costs of $20,000. On January 31, the direct labor for this job equals $2,700. Complete the necessary January 31 journal entry to apply overhead by selecting the account names and dollar amounts from the drop-down menus. Date Account Title Debit Credit Jan. 31 Goods in Process Inventory--Job V $540+ select Factory Overhead select $540+ Submit answer&continue

Explanation / Answer

Predetermined overhead rate = Estimated overhead costs/Estimated direct labor costs = 20000/100000 = 20% Factory overhead applied = Actual direct labor costs*Predetermined overhead rate = 2700*20% = $540

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