Braam Corporation uses direct labor-hours in its predetermined overhead rate.At the beginning of the year,the estimated direct labor-hours were 11,500 hours.At the end of the year,actual direct labor-hours for the year were 9,700 hours,the actual manufacturing overhead for the year was $143,350,and manufacturing overhead for the year was underapplied by $18,220.The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been:
A) $164,023
B) $125,130
C) $148,350
D) $138,350

Question

Quizplus · Accepted Answer

Underapplied (overapplied) manufacturing overhead = Actual manufacturing overhead - Manufacturing overhead applied
Manufacturing overhead applied = Actual manufacturing overhead - Underapplied manufacturing overhead
= $143,350 - $18,220
= $125,130
Overhead applied = Predetermined overhead rate × Amount of the allocation base incurred
Predetermined overhead rate = Overhead applied ÷ Amount of the allocation base incurred
Predetermined overhead rate = $125,130 ÷ 9,700 direct labor-hours
= $12.90 per direct labor-hour
Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base
Estimated total manufacturing overhead = Predetermined overhead rate × Estimated total amount of the allocation base
= $12.90 per direct labor-hour × 11,500 direct labor-hours
= $148,350

Braam Corporation Uses Direct Labor-Hours in Its Predetermined Overhead Rate