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6 June, 18:47

At the beginning of the year, manufacturing overhead for the year was estimated to be $275,280. At the end of the year, actual direct labor-hours for the year were 22,900 hours, the actual manufacturing overhead for the year was $265,400, and manufacturing overhead for the year was overapplied by $18,560. 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: (Round your intermediate calculations to 2 decimal places.)

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  1. 6 June, 18:57
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    estimated direct labor hours = 22,200 hours

    Explanation:

    Giving the following information:

    Estimated overhead = $275,280.

    Actual direct labor-hours for the year were 22,900 hours

    Actual manufacturing overhead = $265,400

    Manufacturing overhead for the year was overapplied by $18,560

    We need to reverse engineer the manufacturing overhead application process for the period.

    Under/over applied overhead = real overhead - allocated overhead

    If overhead was overapplied, the real overhead was lower than applied.

    -18,560 = 265,400 - allocated overhead

    allocated overhead = $283,960

    Now, we need to determine the estimated overhead application rate:

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

    283,960 = Estimated manufacturing overhead rate*22,900

    $12.4=Estimated manufacturing overhead rate

    Finally, we can specify the estimated direct labor hours:

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

    12.4 = 275,280/estimated direct labor hours

    estimated direct labor hours = 22,200 hours
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