Question

Wilson Enterprises applies overhead based on direct labor cost. The company estimates that their overhead for the year will be $240,000, and direct labor cost to be $300,000. Actual direct labor cost for Martinez Manufacturing was $280,000 and actual overhead costs were $220,000. At the end of the year, manufacturing overhead was:

Answer 1

Answer:

Applied Overhead is higher than actual overhead. Hence, manufacturing overhead is $ 4,000

Explanation:

Given data:

estimated overhead = $2,40,000

Labor cost =$2,80,000

Direct labor cost = $3,00,000

$Overhead\ rate = \frac{Estimated\ Overhead}{Estimated\ direct\ labor\ cost}$

                        $= \frac{2,40,000}{3,00,000}$      

                         = $ 0.80 per direct labor cost      

$Applied\ Overhead = Actual\ Labor\ cost\times Overhead\ rate$      

                             $= 2,80,000\times 0.80 Per direct labor cost$  

                             =$ 2,24,000        

Actual Overhead cost = $ 2,20,000        

Applied Overhead is more than actual overhead. Hence, manufacturing overhead is $ 4,000.