Archangel Manufacturing uses a predetermined overhead allocation rate based on a percentage of direct labor costs. The following are the details of production during the year: Calculate the amount of manufacturing overhead costs allocated to production.

Question

Archangel Manufacturing uses a predetermined overhead allocation rate based on a percentage of direct labor costs. The following are the details of production during the year:  Calculate the amount of manufacturing overhead costs allocated to production.

Quizplus · Accepted Answer

First, we need to calculate the total amount of direct labor costs incurred during the year which is $360,000 (60,000 DLH x $6). 
Next, we need to calculate the amount of manufacturing overhead costs allocated to production using the predetermined overhead allocation rate of 40% ($144,000/$360,000). 
Therefore, the amount of manufacturing overhead costs allocated to production is $144,800 (40% x $360,000). So, the best choice is C.

Archangel Manufacturing Uses a Predetermined Overhead Allocation Rate Based on a Percentage