Question

MC Qu. 97 K Company estimates that overhead costs for... K Company estimates that overhead costs for the next year will be $2,890,000 for indirect labor and $850,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. Of 85,000 direct labor hours are planned for this next year, how much overhead would be assigned to a product requiring 5 direct labor hours

Answer 1

Allocated MOH= $220

Step-by-step explanation:

To calculate the predetermined manufacturing overhead rate we need to use the following formula:

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

Predetermined manufacturing overhead rate= (2,890,000 + 850,000) / 85,000

Predetermined manufacturing overhead rate= $44 per direct labor hour

Now, we can allocate overhead:

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

Allocated MOH= 44*5

Allocated MOH= $220