Question

Baka Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $241,800 and 6,800 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $243,400 and actual direct labor-hours were 5,300. The applied manufacturing overhead for the year was closest to: (Round your intermediate calculations to 2 decimal places.)

Answer 1

Applied manufacturimg overhead is calculated by applying predetermined overhead rate to actual labour hours used

Formula for predetermined overhead rate = total estimated manufacturing overheads/total estimated direct labour hours

It will be $241800/6800 hours = $35.56/hour

Actual direct labour hours =5300 hours

So applied overheads = 5300 hours * 35.56/$ = $188468

So the answer is option 3 i.e. $188468