Smith has applied overhead of $73,000 and actual overhead of $87,600 for the month of November. It applies overhead based on direct labor hours and those equaled 14,600 in November. Overhead for the year was estimated to be $900,000. How many direct labor hours were estimated for the year?

Question

Quizplus · Accepted Answer

The overhead rate is calculated based on the applied overhead and the actual direct labor hours for November. The applied overhead is $73,000, and the direct labor hours are 14,600. The overhead rate per direct labor hour is $73,000 / 14,600 = $5 per hour. The estimated overhead for the year is $900,000. To find the estimated direct labor hours for the year, divide the estimated annual overhead by the overhead rate per hour: $900,000 / $5 per hour = 180,000 hours.

Smith Has Applied Overhead of $73,000 and Actual Overhead of $87,600