Davie Company used estimated direct labor hours of 250,000 and estimated manufacturing overhead costs of $1,000,000 in establishing its 2015 predetermined overhead allocation rate. Actual results showed: $$\begin{array} { | l | l | }
\hline \text { Actual manufacturing overhead } & \$ 900,000 \
\hline \text { Allocated manufacturing overhead } & \$ 875,000 \
\hline
\end{array}$$ What was the number of direct labor hours worked during 2015?

Question

Davie Company used estimated direct labor hours of 250,000 and estimated manufacturing overhead costs of $1,000,000 in establishing its 2015 predetermined overhead allocation rate. Actual results showed: $$\begin{array} { | l | l | } 
\hline \text { Actual manufacturing overhead } & \$ 900,000 \
\hline \text { Allocated manufacturing overhead } & \$ 875,000 \
\hline
\end{array}$$ What was the number of direct labor hours worked during 2015?

Quizplus · Accepted Answer

The predetermined overhead rate is calculated as estimated overhead costs divided by estimated direct labor hours: $1,000,000 / 250,000 = $4 per hour. The allocated overhead is $875,000, so the actual direct labor hours worked is $875,000 / $4 = 218,750 hours.

Davie Company Used Estimated Direct Labor Hours of 250,000 and Estimated