PREDETERMINED OVERHEAD RATE, OVERHEAD APPLICATION At the beginning of the year, Kreskin Company estimated the following costs:

Overhead $450,000 Direct labor cost 600,000 Kreskin uses normal costing and applies overhead on the basis of direct labor cost.

(Direct labor cost is equal to total direct labor hours worked multiplied by the wage rate.) For the month of December, direct labor cost was $38,900.

Required:

. Calculate the predetermined overhead rate for the year.

. Calculate the overhead applied to production in December.

Cornerstone Exercise