Reference no: EM132812154

Question - Waterway 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 $25,000, direct labor $15,000, and manufacturing overhead $20,000. As of January 1, Job 49 had been completed at a cost of $112,500 and was part of finished goods inventory. There was a $18,750 balance in the Raw Materials Inventory account.

During the month of January, Waterway Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were sold during the month. The following additional events occurred during the month.

1. Purchased additional raw materials of $112,500 on account.

2. Incurred factory labor costs of $87,500.

3. Incurred manufacturing overhead costs as follows: indirect materials $21,250; indirect labor $25,000; depreciation expense on equipment $15,000; and various other manufacturing overhead costs on account $20,000.

4. Assigned direct materials and direct labor to jobs as follows.

Required - Calculate the predetermined overhead rate for 2020, assuming Waterway Company estimates total manufacturing overhead costs of $1,050,000, direct labor costs of $875,000, and direct labor hours of 25,000 for the year.