Question

Smith has applied overhead of $73,000 and actual overhead of $87,600 for the month of November. It applies overhead based on direct labor hours and those equaled 14,600 in November. Overhead for the year was estimated to be $900,000. How many direct labor hours were estimated for the year

Answer 1

Answer:

estimated labor hours 180,000

Explanation:

The applied overhead is the cost driver times the predetermined overhead rate:

rate x 14,600 = 73,000

rate = 73.000 / 14,600 = 5

Then, the predetermined overhead rate: is determinate as follows:

$\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate$

900,000 expected overhead / expected labor hours = 5

900,000 /5 = expected labor hours  = 180,000

Answer 2

Answer:

Estimated direct labor hours= 180,000

Explanation:

Giving the following information:

Overhead for the year was estimated to be $900,000.

Smith has applied overhead of $73,000

It applies overhead based on direct labor hours and those equaled 14,600 in November.

We have to reverse engineer the allocation method for manufacturing overhead.

First, we need to calculate the estimated overhead rate:

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

73,000= Estimated manufacturing overhead rate*14,600

$5= Estimated manufacturing overhead rate

Estimated manufacturing overhead rate= $5 per direct labor hour

Now, we can determine the estimated direct labor hours:

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

5= 900,000/ total amount of allocation base

5*X= 900,000

total amount of allocation base= 180,000

Estimated direct labor hours= 180,000