Question

Problem 2 (Unit 4.3]) HR Tax Service prepares tax returns and applies manufacturing overhead based on direct labor hours. Information concerning its overhead and labor for the year follows: Estimated direct labor Direct labor incurred Estimated manufacturing overhead Actual manufacturing overhead 9,800 hours @ $13.50 per hour 9.500 hours @ $13.60 per hour $134,750 $133,500 Required A. How much is the Hanna's predetermined overhead rate? B. How much overhead will be applied to a tax return that requires 3.5 hours of direct labor with a total labor cost of $47.60? C. Suppose that HR Tax Service applies manufacturing overhead based on direct labor cost. How much overhead will be applied to a tax return that requires 3.5 hours of direct labor with a total abor cost of $47.60?

Answer 1

Predetermined manufacturing overhead rate based on direct labor hours Predetermined manufacturing overhead rate Predetermined overhead rate is $13.75 per hour A. Estimated Manufacturing overhead Estimated Direct labor hours 134,750 / 9,80013.75 per hour Overhead applied on tax return based on direct labor hours Total direct labor hours on Tax return Predetermined manufacturing overhead rate 3.75 13.75 per labor hour Applied Overhead Total direct labor hours *predetermined manufacturing overhead rate per labor hour) Applied overhead on tax return is $51,56 (3.75 13.75) 51.56 Overhead applied on tax return based on direct labor cost Predetermined manufacturing overhead rate Estimated Manufacturing overhead 134,750 Estimated Direct labor Cost / 132,300-101.85% (9,800 *$13.50) Total direct labor cost on tax return Predetermined manufacturing overhead rate Applied Overhead Total direct labor cost *predetermined manufacturing overhead rate) Applied overhead on tax return is $48.48 47.60 101.85% ($47.60*101.85%) 48.48