At the beginning of the year, manufacturing overhead for the year was estimated to be $702,450. At the end of the year, actual direct labor-hours for the year were 33,100 hours, the actual manufacturing overhead for the year was $697,450, and manufacturing overhead for the year was overapplied by $40,680. 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:
A) 31,500 direct labor-hours
B) 29,452 direct labor-hours
C) 31,276 direct labor-hours
D) 33,100 direct labor-hours

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated as estimated manufacturing overhead divided by estimated direct labor-hours. Given that overhead was overapplied by $40,680, the applied overhead was $697,450 + $40,680 = $738,130. The predetermined rate is $702,450 / estimated hours. Solving $738,130 = rate * 33,100 gives the rate, which can be used to find the estimated hours: $702,450 / rate = 31,500 hours.

At the Beginning of the Year, Manufacturing Overhead for the Year