Question

At the beginning of the year, manufacturing overhead for the year was estimated to be $1,033,125. At the end of the year, actual direct labor-hours for the year were 36,390 hours, the actual manufacturing overhead for the year was $972,000, and manufacturing overhead for the year was overapplied by $65,115. 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: (Do not round intermediate calculations.)

Answer 1

36,250 direct labor- hours

Step-by-step explanation:

Calculation to determine what the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been:

First step is to calculate the Manufacturing overhead applied using this formula

Manufacturing overhead applied = Actual overhead + Overapplied overhead

Let plug in the formula

Manufacturing overhead applied= $972,000 + $65,115

Manufacturing overhead applied= $1,037,115

Second step is to calculate the Predetermined overhead rate using this formula

Predetermined overhead rate = Manufacturing overhead applied ÷Actual direct labor-hours

Let plug in the formula

Predetermined overhead rate= $1,037,115÷ 36,390 direct labor-hours

Predetermined overhead rate = $28.50 per direct labor-hour

Now let calculate the Estimated direct labor-hours using this formula

Estimated direct labor-hours = Estimated total manufacturing overhead ÷Predetermined overhead rate

Let plug in the formula

Estimated direct labor-hours= $1,033,125 ÷$12.50 per direct labor-hour

Estimated direct labor-hours= 36,250 direct labor- hours

Therefore the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been:36,250 direct labor- hours