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29 March, 17:32

At the beginning of the year, manufacturing overhead for the year was estimated to be $916,725. At the end of the year, actual direct labor-hours for the year were 36,330 hours, the actual manufacturing overhead for the year was $880,000, and manufacturing overhead for the year was overapplied by $46,415. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been:

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  1. 29 March, 17:53
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    35,950

    Explanation:

    The calculation of Estimated direct labor hours is shown below:-

    Manufacturing overhead applied = Actual OH + Overapplied OH

    = $880,000 + $46,415

    = $926,415

    Manufacturing overhead applied = Predetermined overhead rate * Actual direct labor hours

    Predetermined overhead rate = Manufacturing overhead applied : Actual direct labor hours

    = $926,415 : 36,330

    = 25.5

    Predetermined overhead rate = Estimated total manufacturing OH * Estimated direct labor hours

    Estimated direct labor hours = Estimated total manufacturing OH : Predetermined overhead rate

    = $916,725 : 25.5

    = 35,950

    Therefore we have applied the above formula.
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