Jared Company’s formula for annual manufacturing overhead is: Y = $150,000 + $8X, where X is...
Jared Company’s formula for annual manufacturing overhead
is:
Y = $150,000 + $8X, where X is direct labor hours
The predicted activity for 2017 is 40,000 direct labor hours and the actual activity for January of 2017 was 5,000 direct labor hours. Using a predetermined overhead rate the applied January overhead is:
a. $ 40,000
b. $ 58,750
c. $190,000
d. $208,750
Homework Answers
In order to calculate the applied overhead for the month of January, firstly, we need to calculate:
Predetermined Overhead Amount (using predicted activity levels)
= $150,000 + ($8 x 40000) = $470,000
Using the above amount, the predetermined overhead rate per labor hour comes to:
= $470,000 / 40000 = $11.75 per labor hour
Now, Applying the predetermined overhead rate to the actual hours worked, we would get:
= $11.75 x 5000 = $58,750 - Option B is the correct answer.
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Jared Company’s formula for annual manufacturing overhead
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