Cosi Company uses a job order costing system and allocates its overhead on the basis of direct labor costs. Cosi expects to incur $74 of overhead during the next period, and expects to use 44,000 labor hours at a cost of $10.00 per hour. What is Cosi Company's predetermined overhead rate? Multiple Choice O 5.95% 59.5% 168% 1682%
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
![### Predetermined Overhead Rate Calculation
**Question:**
Cosi Company uses a job order costing system and allocates its overhead on the basis of direct labor costs. Cosi expects to incur $740,000 of overhead during the next period, and expects to use 44,000 labor hours at a cost of $10.00 per hour. What is Cosi Company's predetermined overhead rate?
**Answer Choices:**
- 5.95%
- 59.5%
- 168%
- 1682%
When attempting to determine the predetermined overhead rate, follow this process:
1. **Calculate the total direct labor cost:**
\[
\text{Total direct labor cost} = \text{Number of labor hours} \times \text{Cost per hour}
\]
\[
\text{Total direct labor cost} = 44,000 \text{ hours} \times \$10.00 \text{ per hour} = \$440,000
\]
2. **Calculate the predetermined overhead rate:**
\[
\text{Predetermined overhead rate} = \frac{\text{Estimated overhead costs}}{\text{Estimated direct labor cost}}
\]
\[
\text{Predetermined overhead rate} = \frac{\$740,000}{\$440,000}
\]
3. **Convert the ratio to a percentage:**
\[
\text{Predetermined overhead rate} = 1.6818 \approx 168.18\%
\]
Thus, the closest answer choice is **168%**.
### Explanation of Diagram:
There are four answer choices presented in a multiple-choice format, each with a respective circle option to select:
- The choices are listed vertically as follows:
1. 5.95%
2. 59.5%
3. 168%
4. 1682%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe127e4e5-d52b-4869-85c0-a507349ba16c%2Fb5102963-2203-42eb-8f1a-efd367b72414%2Fweevpjj_processed.jpeg&w=3840&q=75)
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