The costs of rework should be charged to factory overhead control, but this is not the correct amount that should be charged as it does not include overhead. Since the manufacturing overhead budget includes an allowance for rework, a budgeted amount of direct labor for rework would have been included in the total budgeted direct labor hours used in the denominator of the predetermined overhead rate calculation. Thus, the predetermined overhead rate must be applied to the number of direct labor hours used for the rework.
The costs of rework should be charged to factory overhead control. The amounts that should be charged are all of the costs associated with the rework, including overhead. The costs of direct materials, supplies, and labor total $19,300. In addition, overhead is applied at a rate of 150% of direct labor. Since the manufacturing overhead budget includes an allowance for rework, a budgeted amount of direct labor for rework would have been included in the total budgeted direct labor hours used in the denominator of the predetermined overhead rate calculation. Thus, the predetermined overhead rate must be applied to the number of direct labor hours used for the rework. Direct labor was $14,000, so 150% of this is $21,000. Adding this to the other costs of rework, we get a total of $40,300.
The costs of rework should be charged to factory overhead control. In addition, this amount is incorrect because it does not include an allocation of manufacturing overhead. Since the manufacturing overhead budget includes an allowance for rework, a budgeted amount of direct labor for rework would have been included in the total budgeted direct labor hours used in the denominator of the predetermined overhead rate calculation. Thus, the predetermined overhead rate must be applied to the number of direct labor hours used for the rework.
All the costs of rework should be charged to factory overhead control.
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