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10 September, 13:27

Mackinaw Manufacturing Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, the Corporation worked 20,200 actual direct labor-hours and incurred $142,500 of actual manufacturing overhead cost. They had estimated at the beginning of the year that 17,600 direct labor-hours would be worked and $140,800 of manufacturing overhead costs incurred. The Corporation had calculated a predetermined overhead rate of $8 per direct labor-hour. The Corporation's manufacturing overhead for the year was:

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  1. 10 September, 13:34
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    The Corporation's manufacturing overhead for the year was - $19,100

    Explanation:

    Given information,

    Actual direct labor-hours - 20,200

    Actual manufacturing overhead cost - $142,500

    Direct labor-hours - 17,600

    Manufacturing overhead costs incurred - $140,800

    Predetermined overhead rate for per direct labor-hour - $8

    By using these above information, the Corporation's manufacturing overhead can be computed. The steps for calculation is shown below:

    Step 1 : First, we have to compute manufacture overhead rate.

    Step 2: Than, finally Corporation's manufacturing overhead come.

    So,

    Manufacture overhead rate = Actual direct labor-hours * Predetermined overhead rate

    = 20,200 * $8

    = $161,600

    Now, Corporation's manufacturing overhead = Actual overhead rate = Applied overhead rate

    = $142,500 - $161,600

    = - $19,100

    The Corporation's manufacturing overhead shows negative amount which means it is over applied as it is greater than actual one.

    Thus, The Corporation's manufacturing overhead for the year was - $19,100
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