Question

Impa Inc. applies overhead based upon machine hours. At the beginning of 2018, Impa estimated overhead to be $400,000, machine hours to be 25,000, and direct labor hours to be 40,000. During April, Impa has 3,000 direct labor hours and 4,500 machine hours. What is the amount of overhead applied for April?

Answer 1

Solution :

It is given that,

Impa Inc. estimated an overhead of $ 400,00 machine hours to be 25,000 and that of direct labor hours of 40,000.

During the month of April, Impa Inc. has a 3000 direct labor hours as well as 4500 machine hours.

Therefore, the overhead applied for the month of April is

$\frac{400,000}{25,000}$  machine hours = $ 16 per machine hour

The actual machine hours in April = 4500 machine hours

Therefore the overhead applied = 4500 x 16

                                                      = $ 72,000