Question

Savannah Factory applies manufacturing overhead based on direct labor cost. Information concerning manufacturing overhead and labor for August follows: Estimated Actual Overhead cost $174,000 $171,100 Direct labor hours 5,800 5,900 Direct labor cost $87,000 $89,975 How much overhead should be applied in total during August

Answer 1

$179,950

Step-by-step explanation:

For determining the overhead applied first we have to find the predetermined overhead rate based on the estimated cost which is shown below:

Predetermined overhead rate is

= Estimated overhead cost ÷ estimated direct labor cost

= $174,000 ÷ $87,000

= $2

Now the applied overhead is

= Predetermined overhead rate × actual direct labor cost

= $2 × $89,975

= $179,950

We simply applied the above formula so that the overhead applied could come