Question

g At the beginning of the year, manufacturing overhead for the year was estimated to be $1,033,125. At the end of the year, actual direct labor-hours for the year were 36,390 hours, the actual manufacturing overhead for the year was $972,000, and manufacturing overhead for the year was overapplied by $65,115. 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:

Answer 1

36,250 direct labor-hours

Step-by-step explanation:

a. Underapplied (overapplied) manufacturing overhead = Actual manufacturing overhead - Manufacturing overhead applied

- $65,115 = $972,000 - Manufacturing overhead applied

Manufacturing overhead applied = $972,000 + $65,115 = $1,037,115

b. Manufacturing overhead applied = Predetermined overhead rate × Actual direct labor-hours

Therefore, we have:

Predetermined overhead rate = Manufacturing overhead applied ÷ Actual direct labor-hours = $1,037,115 ÷ 36,390 = $28.50 per direct labor-hour

c. Estimated direct labor-hours = Estimated total manufacturing overhead ÷ Predetermined overhead rate = $1,033,125 ÷ $28.50 = 36,250 direct labor-hours

Therefore, the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been 36,250 direct labor-hours.