Hamilton Pty Ltd uses a standard costing system for product costing. The company uses direct labour hours as the cost driver to apply overhead costs. The following amounts were budgeted for the year:
The following were the actual results:
Calculate the amount of overhead cost applied to work in process inventory.

A) $1 520 000
B) $1 536 000
C) $1 550 000
D) $1 600 000

Question

Hamilton Pty Ltd uses a standard costing system for product costing. The company uses direct labour hours as the cost driver to apply overhead costs. The following amounts were budgeted for the year:

The following were the actual results: Hamilton Pty Ltd uses a standard costing system for product costing. The company uses direct labour hours as the cost driver to apply overhead costs. The following amounts were budgeted for the year: The following were the actual results: Calculate the amount of overhead cost applied to work in process inventory. A) $1 520 000 B) $1 536 000 C) $1 550 000 D) $1 600 000

Calculate the amount of overhead cost applied to work in process inventory.

A) $1 520 000
B) $1 536 000
C) $1 550 000
D) $1 600 000

Nuvia Ramos-Zuniga · Accepted Answer

Final Answer : B, Explanation :  The amount of overhead cost applied to work in process inventory can be calculated as follows:Actual direct labour hours = 40,000Budgeted overhead cost / Budgeted direct labour hours = $1,600,000 / 80,000 = $20 per direct labour hourOverhead cost applied = Actual direct labour hours x Budgeted overhead rate = 40,000 x $20 = $800,000Therefore, the correct answer is B ($1,536,000).

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