A company allocates overhead to production on the basis of direct labor cost. If

Question

A company allocates overhead to production on the basis of direct labor cost. If the company's total estimated overhead is $960,000 and estimated direct labor cost is $1,400,000, determine the amount of overhead to be allocated to finished goods inventory. There is $836,000 of total direct labor cost in the jobs in the finished goods inventory

A company allocates overhead to production on the basis of direct labor cost. If the company's total estimated overhead is $960,000 and estimated direct labor cost is $1,400,000, determine the amount of overhead to be allocated to finished goods inventory. There is $836,000 of total direct labor cost in the jobs in the finished goods inventory

Explanation / Answer

Production Overhead estimated rate = Estimated Overhead / Estimated Labor cost = 960000 / 140000 = 0.685714

For 836000 cost of direct labor , production overhead = 836000 * 0.685714 = 573257

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