Question

Baka corporation applies manufacturing overhead on the basis of direct labor-hours. at the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $239,700 and 4,700 estimated direct labor-hours. actual manufacturing overhead for the year amounted to $242,000 and actual direct labor-hours were 4,600. the applied manufacturing overhead for the year was closest to:

Answer 1

First of all, the predetermined overhead rate will be calculated.

Predetermined overhead rate = Estimated Overheads ÷ Estimated direct labor hours

Estimated overheads = $ 239,700

Estimated direct labor hours = 4,700 hours

Predetermined overhead rate = $ 239,700 ÷ 4,700 hours = $ 51 per direct labor hour

Actual hours worked = 4,600 hours

Applied overheads = Actual hours worked × Predetermined overhead rate

Applied overheads = 4,600 hour × $ 51 per direct labor hour = $ 234,600