In 2012, the Doric Agricultural Products Company used a predetermined manufacturing overhead rate of 150% times direct labor cost. Information for the year is as follows:
$$\begin{array} { l r }
\text { Actual direct materials cost } & \$ 812,500 \
\text { Actual direct labor cost } & \$ 180,000 \
\text { Actual overhead costs incurred: } & \$ 264,000 \
\text { Total direct labor hours } & 5,520
\end{array}$$ What was the preliminary ending balance in the manufacturing overhead account, before the year-end adjustment to clear the balance to zero?

Question

In 2012, the Doric Agricultural Products Company used a predetermined manufacturing overhead rate of 150% times direct labor cost. Information for the year is as follows:
$$\begin{array} { l r } 
\text { Actual direct materials cost } & \$ 812,500 \
\text { Actual direct labor cost } & \$ 180,000 \
\text { Actual overhead costs incurred: } & \$ 264,000 \
\text { Total direct labor hours } & 5,520
\end{array}$$ What was the preliminary ending balance in the manufacturing overhead account, before the year-end adjustment to clear the balance to zero?

Quizplus · Accepted Answer

The predetermined overhead rate is 150% of direct labor cost. The actual direct labor cost is $180,000. So, the predetermined overhead cost is $180,000 x 150% = $270,000. The actual overhead costs incurred are $264,000. So, the preliminary ending balance in the manufacturing overhead account is $270,000 - $264,000 = $6,000 credit.

In 2012, the Doric Agricultural Products Company Used a Predetermined