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A company expected its annual overhead costs to be $750,000 and machine hours to equal 100,000 hours. Actual overhead was $745,000, and actual machine hours totalled 97,000 hours.

-How much overhead was applied?

Question

Use the following information to answer questions

A company expected its annual overhead costs to be $750,000 and machine hours to equal 100,000 hours. Actual overhead was $745,000, and actual machine hours totalled 97,000 hours.

-How much overhead was applied?

Quizplus · Accepted Answer

The overhead rate is calculated as follows: 
Overhead rate = Total overhead costs / Total direct labor hours 
= $727,500 / 60,000 hours 
= $12.125 per direct labor hour 
The overhead applied to the job is calculated as follows: 
Overhead applied = Overhead rate x Direct labor hours used 
= $12.125 x 60,000 hours 
= $727,500 
Therefore, the correct answer is B.

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