Question

Ashland Corporation estimates its manufacturing overhead costs to be $170,000 and its direct labor costs to be $324,000 for 2020. The actual manufacturing labor costs were $82,000 for Product 1, $123,000 for Product 2 and $162,000 for Product 3 during 2020. Manufacturing overhead is allocated to products on the basis of direct labor costs using a predetermined overhead rate. The actual manufacturing overhead cost for the year was $174,000. The amount of overhead assigned to Product 3 during 2020 was:

Answer 1

85,001

Step-by-step explanation:

The computation of amount of overhead assigned to Product 3 during 2020 is shown below:-

Predetermined overhead rate = Estimated manufacturing overhead costs ÷ Estimated direct labor costs

= $170,000 ÷ $324,000

= 0.5247

Amount of overhead assigned to Product 3 = Actual manufacturing costs for Product 3 × Predetermined overhead rate

= $162,000 × 0.5247

= 85,001

So, we have applied the above formula.