Question

K company estimates that overhead costs for the next year will be 3,266,000 for the indirect labor and 920000 for factory utilities. the company uses direct labor hours as its overhead allocation base, if 920000 direct labor hours are planned for this next year, how much overhead would be assigned to ap roduct requiring 4 direct labor hours?

Answer 1

Allocated MOH= $18.2

Step-by-step explanation:

Giving the following information:

K company estimates that overhead costs for the next year will be 3,266,000 for the indirect labor and 920000 for factory utilities. Direct labor hours= 920,000

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

Estimated manufacturing overhead rate= (3,266,000 + 920,000)/920,000= $4.55 per direct labor hour.

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

Allocated MOH= 4.55*4= $18.2