Question

Silver Mfg. provided the following information from its accounting records for 2008: Expected production 20,000 labor hours Actual production 18,800 labor hours Budgeted overhead $400,000 Actual overhead $384,000 How much is the overhead application rate if Silver bases the rate on direct labor hours? Select one: a. $20.43 per hour b. $20.00 per hour c. $19.20 per hour d. $21.28 per hour

Answer 1

Answer:

Option (b) is correct.

Explanation:

Expected production = 20,000 labor hours

Actual production = 18,800 labor hours

Budgeted overhead = $400,000

Actual overhead = $384,000

$overhead\ application\ rate\ per\ direct\ labor=\frac{Estimated\ factory\ overhead\ cost}{Estimated\ direct\ labor\ hours}$

$overhead\ application\ rate\ per\ direct\ labor=\frac{400,000}{20,000}$

= $20 per hour