Question

Silver Mfg. provided the following information from its accounting records for 2008: Expected production 20,000 labor hours Actual production 18,800 labor hours Budgeted overhead $400,000 Actual overhead $384,000 How much is the overhead application rate if Silver bases the rate on direct labor hours? Select one: a. $20.43 per hour b. $20.00 per hour c. $19.20 per hour d. $21.28 per hour

Answer 1

Option (b) is correct.

Step-by-step explanation:

Expected production = 20,000 labor hours

Actual production = 18,800 labor hours

Budgeted overhead = $400,000

Actual overhead = $384,000

`overhead\ application\ rate\ per\ direct\ labor=(Estimated\ factory\ overhead\ cost)/(Estimated\ direct\ labor\ hours)`

`overhead\ application\ rate\ per\ direct\ labor=(400,000)/(20,000)`

= $20 per hour