Question

Minton Company provided the following information from its accounting records for 2017:

Expected production 60,000 labor hours
Actual production 56,000 labor hours
Budgeted overhead $1,800,000
Actual overhead $1,740,000
How much is the overhead application rate if Minton Company bases it on direct labor hours?

Answer 1

The overhead application rate based on direct labor hours is $30 per labor hour.

Step-by-step explanation:

The overhead application rate is calculated by dividing the budgeted overhead by the expected production, and then multiplied by the actual production. In this case, the budgeted overhead is $1,800,000 and the expected production is 60,000 labor hours. Therefore, the overhead application rate based on direct labor hours is $30 per labor hour.