Question

At the beginning of the year, managers at King Industries estimated $400,000 in manufacturing overhead, 20,000 direct labor hours, and 30,000 machine hours. Actual manufacturing costs at the end of the year were $425,000 in manufacturing overhead. During the year, 22,000 direct labor hours and 27,000 machine hours were incurred. If King Industries uses a normal costing system, and if overhead is applied based on direct labor hours, how much overhead was applied during the year?

Answer 1

Answer:

Allocated Overhead= $440,000

Explanation:

Giving the following information:

The estimated overhead= $400,000

Estimated direct labor hours= 20,000

Actual direct labor hours= 22,000 direct labor hours

First, we need to calculate the estimated overhead rate. Then, allocate overhead based on actual direct labor hours:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 400,000/20,000= $20 per direct labor hour

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH=20*22,000= $440,000