Question

Kilt Company used a predetermined overhead rate of $42.00 per direct labor hour for the year and estimated that direct labor hours would total 5,500 hours. Assume the only inventory balance is an ending Work in Process balance of $17,000. How much overhead was applied during the year

Answer 1

$210,000

Step-by-step explanation:

predetermined overhead rate = $42.00 per direct labor hour

budgeted direct labor hours = 5,500 hours

ending work in process (WIP) = $17,000

applied overhead during the year?

direct materials = $110,000

direct labor hours = 5,000

direct labor costs = $150,000

incurred manufacturing overhead = $166,000

applied overhead = overhead rate x actual direct labor hours = $42.00 x 5,000 = $210,000

the company actually spent $44,000 less than budgeted (= $210,000 - $166,000)

Answer 2

$231,000

Step-by-step explanation:

Predetermined Overhead applied rate is calculated by dividing the budgeted overhead by the budgeted level of activity on which the overhead is applied. It is a rate at which the overhead is applied to a product / project/ department.

Overhead are applied using predetermined overhead rate and actual level of activity.

Applied overhead = Predetermined overhead rate x direct labor hours

Applied overhead = 5,500 x $42.00 = $231,000