Question

Ashland Corporation estimates its manufacturing overhead costs to be $200,000 and its direct labor costs to be $336,000 for 2020. The actual manufacturing labor costs were $88,000 for Product 1, $132,000 for Product 2 and $168,000 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 $180,000. The amount of overhead assigned to Product 3 during 2020 was:

Answer 1

Allocated MOH= $99,960

Step-by-step explanation:

First, we need to calculate the predetermined overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 200,000 / 336,000

Predetermined manufacturing overhead rate= $0.595 per direct labor dollar

Now, we can allocate overhead to Product 3:

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

Allocated MOH= 0.595*168,000

Allocated MOH= $99,960