Rector Company manufactures a line of lightweight running shoes. CEO Mark Rector estimated that the company would incur $2,500,000 in manufacturing overhead during the coming year. When Rector Company uses direct labor hours as its manufacturing overhead application base, predetermined overhead rate is $10.00/DLH and when it uses machine hours as its manufacturing overhead application base, predetermined overhead rate is $6.25/MH. Additionally, he estimated the company would operate at a level requiring 250,000 direct labor hours and 400,000 machine hours. At the end of the year, Rector Company had worked 245,000 direct labor hours, used 410,000 machine hours, and incurred $2,515,000 in manufacturing overhead.

If Rector Company used direct labor hours as its manufacturing overhead application base, how much overhead was applied to jobs during the year?

Question

Abbigail Dean

Business

30 December, 11:13

Rector Company manufactures a line of lightweight running shoes. CEO Mark Rector estimated that the company would incur $2,500,000 in manufacturing overhead during the coming year. When Rector Company uses direct labor hours as its manufacturing overhead application base, predetermined overhead rate is $10.00/DLH and when it uses machine hours as its manufacturing overhead application base, predetermined overhead rate is $6.25/MH. Additionally, he estimated the company would operate at a level requiring 250,000 direct labor hours and 400,000 machine hours. At the end of the year, Rector Company had worked 245,000 direct labor hours, used 410,000 machine hours, and incurred $2,515,000 in manufacturing overhead.

If Rector Company used direct labor hours as its manufacturing overhead application base, how much overhead was applied to jobs during the year?

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Answers (1)

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Ellis · Answer 1

Allocated MOH = $2,450,000

Explanation:

Giving the following information:

The predetermined overhead rate is $10.00/DLH

Actual direct labor hours = 245,000 direct labor hours

We were provided with the predetermined overhead rate, we need to allocate overhead to the period based on actual direct labor hours:

Allocated MOH = Estimated manufacturing overhead rate * Actual amount of allocation base

Allocated MOH = 10*245,000

Allocated MOH = $2,450,000