Coronado Industries has outstanding accounts receivable totaling $6.57 million as of December 31 and sales on credit during the year of $22.6 million. There is also a credit balance of $11000 in the allowance for doubtful accounts. If the company estimates that 5% of its outstanding receivables will be uncollectible, what will be the amount of bad debt expense recognized for the year?

$317,500

Explanation:

The computation of the amount of bad debt expense is shown below:-

Bad debt expenses = (Accounts receivable × Outstanding receivable percentage) - Opening Allowance for doubtful debts

= ($6.57 million × 5%) - $11,000

= $317,500

Therefore for computing the bad debt expense we simply applied the above formula.

b. $30.00 per hour

Explanation:

Overhead application rate = Budgeted Overhead / Budgeted Activity

                                            = $900,000 / 30,000  labor hours

                                            = $30 per direct labor hour

Conclusion :

The overhead application rate is $30.00 per hour.