Question

Braam Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 11,500 hours. At the end of the year, actual direct labor-hours for the year were 9,700 hours, the actual manufacturing overhead for the year was $143,350, and manufacturing overhead for the year was underapplied by $18,220. The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been: (Do not round your intermediate calculations.)

Answer 1

$20,000.

Step-by-step explanation:

Step 1 : Applied overheads

Applied overheads = $143,350 - $18,220 = $125,130

Step 2 : Overhead rate

Overhead rate = $125,130 / 9,700 = $12.90

The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been $20,000.