Question

Rector Company manufactures a line of lightweight running shoes. CEO Mark Rector estimated that the company would incur $2,500,000 in manufacturing overhead during the coming year. When Rector Company uses direct labor hours as its manufacturing overhead application base, predetermined overhead rate is $10.00/DLH and when it uses machine hours as its manufacturing overhead application base, predetermined overhead rate is $6.25/MH. Additionally, he estimated the company would operate at a level requiring 250,000 direct labor hours and 400,000 machine hours. At the end of the year, Rector Company had worked 245,000 direct labor hours, used 410,000 machine hours, and incurred $2,515,000 in manufacturing overhead.

If Rector Company used direct labor hours as its manufacturing overhead application base, how much overhead was applied to jobs during the year?

Answer 1

Allocated MOH= $2,450,000

Step-by-step explanation:

Giving the following information:

The predetermined overhead rate is $10.00/DLH

Actual direct labor hours= 245,000 direct labor hours

We were provided with the predetermined overhead rate, we need to allocate overhead to the period based on actual direct labor hours:

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

Allocated MOH= 10*245,000

Allocated MOH= $2,450,000