Cosi Company uses a job order costing system and allocates i

Cosi Company uses a job order costing system and allocates its overhead on the basis of direct labor costs. Cosi expects to incur $710,000 of overhead during the next period, and expects to use 41,000 labor hours at a cost of $10.00 per hour. What is Cosi Company\'s overhead application rate? 0 5.78% 1732%. o 173%. 62% O 57.8%

Solution

Answer

1.

Overhead application rate = (Estimated overhead cost / Estimated Labor Cost) * 100

= $710,000 / (41,000 hours * $10)

Overhead application rate = 173.2%

2.

Answer = $31,200

Raw Material Purchased

      156,000

Add: Opening Raw Material

         20,200

Raw material available for use in Production

      176,200

Less: Closing Raw Material

         31,200

Raw Material used in Production

      145,000

Less: Indirect Material

         12,100

Direct Material used in Production

      132,900

Closing Raw material = Raw material used in production - Direct Material Used in Production - Indirect Material

= 176,200 - 132,900 - 12,100

Closing Raw material = $31,200

3.

Work in progress = Direct Material + Direct Labor + Overhead

4,050 = 1,910 + 730 + Overhead

Overhead = 4,050 – 1,910 – 730

Overhead = $1,410

4.

Overhead = 155% of Direct Material Cost

= 155% * 90,000

Overhead = $139,500

Raw Material Purchased	156,000
Add: Opening Raw Material	20,200
Raw material available for use in Production	176,200
Less: Closing Raw Material	31,200
Raw Material used in Production	145,000
Less: Indirect Material	12,100
Direct Material used in Production	132,900