Question

At the beginning of the year, manufacturing overhead for the year was estimated to be $745,500. At the end of the year, actual direct labor-hours for the year were 36,240 hours, the actual manufacturing overhead for the year was $730,000, and manufacturing overhead for the year was overapplied by $31,040. 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: (Round your intermediate calculations to 2 decimal places.)

Answer 1

The correct answer is 35,500 direct labor hour.

Step-by-step explanation:

According to the scenario, the computation of the given data are as follows:

First we calculate the manufacturing OH applied.

So, Manufacturing OH applied = Actual OH + Overapplied OH

Manufacturing OH applied = $730,000 + $31,040 = $761,040

Now, predetermined OH rate = Manufacturing OH applied ÷ Actual direct labor hours

Predetermined OH rate = $761,040 ÷ 36,240 = $21 direct labor hour

So, we can calculate the estimated direct labor hour by using following formula:

Estimated direct labor hours = Estimated total manufacturing OH ÷ Predetermined OH rate

Estimated Direct labor hour = $745,500 ÷ $21

= 35,500 Direct labor hour.