Ask Question
5 June, 18:52

Martinez Manufacturing applies overhead based on direct labor hours. The company estimates that their overhead for the year will be $180,000, and that they will use 72,000 direct labor hours. During the year, Martinez Manufacturing actually used 75,000 direct labor hours and actual overhead costs were $190,000. At the end of the year, manufacturing overhead was: Overapplied by $2,500. Overapplied by $10,000. Underapplied by $2,500. Underapplied by $10,000.

+5
Answers (1)
  1. 5 June, 18:59
    0
    The correct answer is C: underapplied by $2,500

    Explanation:

    Giving the following information:

    Martinez Manufacturing applies overhead based on direct labor hours.

    The company estimates that their overhead for the year will be $180,000 and that they will use 72,000 direct labor hours.

    During the year, Martinez Manufacturing used 75,000 direct labor hours and actual overhead costs were $190,000

    We need to calculate if the overhead was under or over applied and in what amount.

    Predetermined overhead rate = total estimated manufacturing overhead for the period / total amount of allocation base

    Predetermined overhead rate = 180000/72000 = $2.5 an hour

    Now, we can calculate the amount of overhead allocated:

    Overhead allocated = 75000 hours*2.5 = $187,500

    Over/under applied = actual overhead - allocated overhead = 190,000 - 185,500 = $2,500 underapplied
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Martinez Manufacturing applies overhead based on direct labor hours. The company estimates that their overhead for the year will be ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers