Forsyth Company uses estimated direct labor hours of 175,000 and estimated manufacturing overhead costs of $350,000 in establishing its 2014 predetermined overhead allocation rate. Actual results showed: The number of direct labor hours worked during the period was:

Question

Forsyth Company uses estimated direct labor hours of 175,000 and estimated manufacturing overhead costs of $350,000 in establishing its 2014 predetermined overhead allocation rate. Actual results showed:  The number of direct labor hours worked during the period was:

Quizplus · Accepted Answer

The predetermined overhead allocation rate is calculated by dividing the estimated manufacturing overhead costs by the estimated direct labor hours. In this case, the rate is $2.00 per direct labor hour ($350,000 ÷ 175,000 hours). To determine the actual manufacturing overhead costs incurred, multiply the predetermined overhead allocation rate by the actual number of direct labor hours worked. If the actual overhead costs incurred were $355,000, then the actual number of direct labor hours worked must have been 160,000 hours ($355,000 ÷ $2.00 per hour).

Forsyth Company Uses Estimated Direct Labor Hours of 175,000 and Estimated