(a) Calculate the predetermined overhead rate for 2020, assuming Lott Company estimates total manufacturing overhead costs of $840,000, direct labor costs of $700,000, and direct labor hours of 20,000 for the year.

Cornerstones of Cost Management (Cornerstones Series)
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Chapter5: Product And Service Costing: Job-order System
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Problem 17E: During August, Skyler Company worked on three jobs. Data relating to these three jobs follow:...
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Lott Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2020, Job 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $20,000, direct labor $12,000, and manufacturing overhead $16,000. As of January 1, Job 49 had been completed at a cost of $90,000 and was part of finished goods inventory. There was a $15,000 balance in the Raw Materials Inventory account.

During the month of January, Lott Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $122,000 and $158,000, respectively. The following additional events occurred during the month.

1.   Purchased additional raw materials of $90,000 on account.
2.   Incurred factory labor costs of $70,000. Of this amount $16,000 related to employer payroll taxes.
3.   Incurred manufacturing overhead costs as follows: indirect materials $17,000; indirect labor $20,000; depreciation expense on equipment $12,000; and various other manufacturing overhead costs on account $16,000.
4.   Assigned direct materials and direct labor to jobs as follows.

Job No.
 
Direct Materials
 
Direct Labor
50
  $10,000   $5,000
51
  39,000   25,000
52
  30,000   20,000

(a) Calculate the predetermined overhead rate for 2020, assuming Lott Company estimates total manufacturing overhead costs of $840,000, direct labor costs of $700,000, and direct labor hours of 20,000 for the year.


Predetermined overhead rate   enter the Predetermined overhead rate in percentages %
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