Chapter 2, Problem 3.2GAP

To determine

Concept introduction:

Predetermined overhead allocation:

Manufacturing overhead cost is the pool of all indirect costs incurred for production. These are the costs which are not directly traced to the product. Manufacturing costs include indirect material indirect labor and overheads. These costs are allocated to the products using the pre-determined overhead allocation rate. The formula of pre-determined overhead allocation rate is as follows:

$\text{Pre-determined overhead allocation rate = }\frac{\text{Estimated Manufacturing overhead Cost}}{\text{Allocation base}}$

To calculate:

The Overhead applied to the work in process inventory.