The predetermined overhead rate for neutronics, inc. is 70% of direct labor cost. the company incurs $250,000 of factory labor costs during the month and $180,000 of that cost is direct labor and $70,000 is indirect labor. actual overhead incurred was $130,000. what should be the amount of overhead debited to work in process inventory?

The amount that should be debited to work-in-progress inventory is $126,000.

Further Explanation:

Overhead:

Overhead refers to the business expenses that are not directly associated with the production but required in the production process of the product. The overhead are incurred to support the business activities for the undisturbed flow of the operating activities. The overhead does not include the direct costs of the production such as direct material and direct labor. There are majorly two types of overhead:

Calculate the work-in-progress inventory:

The work-in-progress inventory can be calculated by multiplying the overhead rate of 70% with the total direct labor cost which is $180,000. It will be the budgeted overhead cost.

Thus, the amount that should be debited to work-in-progress inventory is $126,000.

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Answer Details:

Grade: Middle school

Chapter: Overhead allocation  

Subject: Cost accounting

Keywords: cost accounting, predetermined, overhead, rate, for, neutronics, inc,direct, labor, cost, company, incurs, factory,labor, costs, during, month, direct labor,indirect labor, actual, overhead, incurred, amount, overhead, debited,work in process inventory.

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