Question

At the beginning of the year, manufacturing overhead for the year was estimated to be $670,700. At the end of the year, actual direct labor-hours for the year were 36,200 hours, the actual manufacturing overhead for the year was $665,700, and manufacturing overhead for the year was overapplied by $22,100. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been:

A) 35,037 direct labor-hours
B) 35,300 direct labor-hours
C) 36,200 direct labor-hours
D) 33,874 direct labor-hours

Answer 1

The estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been 35,300 direct labor-hours.

Step-by-step explanation:

The estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate can be calculated using the formula: Estimated manufacturing overhead / Predetermined overhead rate. In this case, the estimated manufacturing overhead at the beginning of the year is $670,700 and the actual manufacturing overhead is $665,700. The amount of overapplied overhead is $22,100. Therefore, the estimated direct labor-hours at the beginning of the year can be calculated as follows:

Estimated direct labor-hours = Estimated manufacturing overhead / Predetermined overhead rate

= $670,700 / ($665,700 + $22,100) * 36,200 hours

= $670,700 / $687,800 * 36,200 hours

= 35,300 direct labor-hours