Question

Botosan Factory has budgeted factory overhead for the year at $453,120, and budgeted direct labor hours for the year are 384,000. If the actual direct labor hours for the month of May are 349,400, the overhead allocated for May is

Answer 1

Answer: $412,292

Explanation:

First compute Overhead Absorption Rate = Budgeted Overhead divided by Budgeted Activity Level

In this question the activity level is Direct Labour Hours (DLH) which is the basis for allocating overhead.

budgeted factory overhead for the year at $453,120, and budgeted direct labor hours for the year are 384,000.

$453,120 divided by 384,000 DLH =$1.18

Overheard to be allocated for May is OAR * Actual Activity level

$1.18*349400= $412,292

This is the amount to be allocated to may

Answer 2

Answer:

$492,292

Explanation:

Given:

Budgeted overhead=$453,120

Budgeted direct labour hours=384,000

Actual labour hours for may=349,400

Solution

Overhead absorption rate=Budgeted overhead/budgeted direct labour hours

Overhead absorption rate=$453,120/384,000

=$1.18

Overhead allocation for may= overhead absorption rate× actual labour hours for may

Overhead allocation for may=$1.18 × 349,400

= $492,292