The following information was gathered for Larsen Company for the year ended December 31, 20X1.

-Assume that direct-labour hours is the cost driver. What is the amount of factory overhead applied?

Question

The following information was gathered for Larsen Company for the year ended December 31, 20X1.
 
-Assume that direct-labour hours is the cost driver. What is the amount of factory overhead applied?

Quizplus · Accepted Answer

To calculate the amount of factory overhead applied, we need to use the predetermined overhead rate:
Predetermined overhead rate = Estimated total manufacturing overhead / Estimated direct labor hours
= ($270,000 + $65,000) / 10,000 hours
= $33.50 per direct labor hour

Then, to find the amount of factory overhead applied, we multiply the predetermined overhead rate by the actual direct labor hours worked:
Factory overhead applied = Predetermined overhead rate x Actual direct labor hours
= $33.50 x 2,300 hours
= $76,950

Therefore, the best choice is B, with the explanation above.

The Following Information Was Gathered for Larsen Company for the Year