Question

Manufacturing overhead is estimated to be $400,000 for the year, actual manufacturing overhead is $415,000, and actual labor hours are 21,000. (T of F) If the amount of manufacturing overhead applied to production is $420,000, and the firm applies overhead using direct labor hours, then the estimated number of direct labor hours is $25,000.

True

False

Answer 1

Estimated manufacturing overhead = $400,000

Actual manufacturing overhead = $415,000

Actual direct labor hour = 21,000

Manufacturing overhead applied = $420,000

Manufacturing overhead applied = Actual direct labor hour x Predetermined overhead rate

420,000 = 21,000 x Predetermined overhead rate

Predetermined overhead rate = $20 per direct labor hour

Predetermined overhead rate =  Estimated manufacturing overhead/ Estimated direct labor hours

20 = 400,000/Estimated direct labor hours

Estimated direct labor hours = 20,000

Hence, the given statement ""estimated number of direct labor hours is $25,000"" is false.

Estimated number of direct labor hours is 20,000.

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