Question

The Dewey Company uses a predetermined overhead rate to apply manufacturing overhead to production. The rate is based on direct labor hours. Estimates for the year just ended are as follows: Estimated manufacturing overhead Estimated direct labor hours $300,000 60,000 During the year Dewey Company used 37,000 direct labor hours. At the end of the year, Dewey Company records revealed the following information: Raw materials inventory Work-in-process inventory Finished goods inventory Cost of goods sold Manufacturing overhead costs incurred $ 35,000 60,000 105,000 400,000 200.000 Required: a. Calculate the predetermined overhead rate for the year. b. Determine the amount of overhead applied during the year c. Determine the amount of underapplied or overapplied manufacturing overhead for the year.

Answer 1

Part-a

Predetrmine Overhead Rate= Estimated Manufacturing Overhead/ Estimated DLH

=300000/60000=$5/Hour

Computation of Amount of Overhead Applied

Direct Labour Hour Used= 37000 DLH

Predetermined Overhead Rate= $5/ Hour

Overhead Applied = 37000*5=$185000

Part-c

Actual Overhead Incurred : $200000

Overhead Applied:-     $ $185000

Overhead Under Applied ( 200000-185000)= $15000

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