Job Costing: Applied Overhead Calculation Step by step Solution with Explanation

Your question:

XYZ Company uses a job order costing system and has established a pre-determined overhead rate of 145% of direct labor cost. Job #231 was charged with direct materials of $69,000 and had a total cost of $228,250.

Job Costing: Applied Overhead Calculation Answers and Explanation

2. • Denote applied overhead cost as AO.

   • We know the pre-determined overhead rate is 145% of direct labor cost, which can be written as 1.45 * direct labor cost (DL).

4. Solve for DL:

   • Rearrange the equation to isolate DL:

5. Applied Overhead Cost:

   • Now that we have the direct labor cost, apply the predetermined overhead rate to find AO: