(Predetermined OH rate) Rachel Company has a monthly overhead cost for¬ mula of $42,900 + $6 per direct labor hour for 2007. The firm’s 2007 ex¬ pected annual capacity is 156,000 direct labor hours, to be incurred evenly each month. Making one unit of the company’s product requires 3 direct la¬ bor hours.

a. Determine the total overhead to be applied to each unit of product in 2007.

b. Prepare journal entries to record the application of overhead to Work in Process Inventory and the incurrence of $128,550 of actual overhead in January 2007 when 12,780 direct labor hours were worked.

c. Given the information in part (b), how many units should have been produced in January?

LO1.