Question

Brace Corporation uses direct labor-hours as the cost driver in its normal costing system. Brace budgeted that it would use 21,600 direct-labor hours during the year. At the end of the year, actual direct labor-hours for the year were 20,400 hours, the actual manufacturing overhead for the year was $506,920, and Brace had $20,440 of underapplied overhead. The budgeted manufacturing overhead must have been: Round to the nearest dollar.

Answer 1

total estimated overhead costs for the period= $515,095.2

Step-by-step explanation:

First, we need to calculate the allocated overhead:

Under/over applied overhead= real overhead - allocated overhead

20,440 = 506,920 - allocated overhead

allocated overhead= $486,480

Now, we can determine the predetermined overhead rate:

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

486,480= Estimated manufacturing overhead rate*20,400

Estimated manufacturing overhead rate= 486,480/20,400

Estimated manufacturing overhead rate= $23.847 per direct labor hour

Finally, the estimated overhead for the period:

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

23.847= total estimated overhead costs for the period/21,600

total estimated overhead costs for the period= 21,600*23.847

total estimated overhead costs for the period= $515,095.2