Question

Adams Manufacturing allocates overhead to production on the basis of direct labor costs. At the beginning of the year, Adams estimated total overhead of $368,900; materials of $407,000 and direct labor of $217,000. During the year Adams incurred $415,000 in materials costs, $412,900 in overhead costs and $221,000 in direct labor costs. Compute the amount of overhead applied to jobs during the year.
a. $375,700.
b. $412,900.
c. $368,900.
d. $412,890.
e. $424,150.

Answer 1

Answer:

Allocated MOH= $375,700

Explanation:

Giving the following information:

Estimated total overhead= $368,900

Estimated direct labor= $217,000

Actual direct labor= $221,000

First, we need to calculate the predetermined overhead rate:

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

Predetermined manufacturing overhead rate= 368,900/217,000

Predetermined manufacturing overhead rate= $1.7 per direct labor dollar

Now, we can allocate overhead based on actual labor costs:

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

Allocated MOH= 1.7*221,000

Allocated MOH= $375,700