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Using the following accounts and an overhead rate of 90% of direct labor cost, determine the amount of applied overhead. Work in Process Inventory Beginning WIP 17,600 Direct Materials 52,800 Direct Labor ? Applied Overhead ? To Finished Goods ? Ending WIP 36,080 Finished Goods Inventory Beginning FG 5,200 201,520 Ending FG

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Answer:

$79,200

Explanation:

The computation of the amount of applied overhead is shown below:

Let us assume

Direct labor cost = Y      

Applied overhead will be = 0.9 Y (90% of Y )

As we know that

Beginning Work in process + Direct material + Direct labor + Applied overhead = Transfer to finished goods + Ending Work in process  

$17,600 + $52,800 + Y + 0.9 Y = $201,520 + $36,080      

$70,400 + 1.9 Y = $237,600          

1.9 Y = $237,600 - $70,400          

1.9 Y = $167,200          

Y = $167,200 ÷ 1.9          

Y = $88,000          

So, Direct labor cost is $ 88,000.        

Therefore the Amount of applied overhead will be

= $88,000 × 90%

= $79,200    

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