Question

At the beginning of the year, manufacturing overhead for the year was estimated to be $821,100. At the end of the year, actual direct labor-hours for the year were 36,280 hours, the actual manufacturing overhead for the year was $790,000, and manufacturing overhead for the year was overapplied by $44,440. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been:

Answer 1

Answer:

estimated direct labor hours= 35,700 hours

Explanation:

Giving the following information:

Estimated overhead= $821,100.

Actual direct-labor hours= 36,280 hours

Actual manufacturing overhead= $790,000

Manufacturing overhead for the year was overapplied by $44,440.

We need to reverse engineer the overhead application process to calculate the estimated direct labor hours.

Under/over applied overhead= real overhead - allocated overhead

-44,440= 790,000 - allocated overhead

allocated overhead= 834,440

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

834,440= Estimated manufacturing overhead rate*36,280

Estimated manufacturing overhead rate= $23

Finally, we can determine the estimated direct labor hours:

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

23= 821,100/ estimated direct labor hours

estimated direct labor hours= 821,100/23

estimated direct labor hours= 35,700 hours