Question

Bayest Manufacturing Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, the Corporation worked 58,750 actual direct labor-hours and incurred $462,000 of actual manufacturing overhead cost. The Corporation had estimated that it would work 61,100 direct labor-hours during the year and incur $403,260 of manufacturing overhead cost. The Corporation's manufacturing overhead cost for the year was:

Answer 1

Applied overhead: 387,750

underapplied by 74,250

Step-by-step explanation:

`(Cost\: Of \:Manufacturing \:Overhead)/(Cost \:Driver)= Overhead \:Rate`

to get the predetermined overhead rate we will distribute the expected cost along a cost driver. In this case, labor hours.

403,260 / 61,100 = 6.6

Then, we apply this rate to the actual labor hours for the period:

58,750 x 6.6 = 387,750

This will be the applied overhead for the period.

The we compare with the actual overhead:

387,750 - 462,000 = (74,250)

As the actual cost were higher the overhead was underpapplied.