Preston Manufacturing is working on two housing projects.Overhead is applied on the basis of direct labor hours.At the beginning of the year,the company estimated that overhead would be $64,000 and 10,000 direct labor hours would be worked.Both projects were started and completed in the current accounting period.The following transactions were completed during the period: (a)Used $10,000 of direct material on Project I and $6,800 of direct material on Project II.
(b)Labor costs for the two jobs amounted to the following: Project I,$24,000 (2,000 hours); Project II,$44,000 (6,000 hours).
(c)Project II was sold during the period for $120,000.
The amount of estimated overhead applied to Work in Process Inventory for the period equals: (Do not round intermediate calculation.)
A) $51,200.
B) $64,000.
C) $54,400.
D) $44,000.

Question

Quizplus · Accepted Answer

Overhead is applied on the basis of direct labor hours. The company estimated that overhead would be $64,000 and 10,000 direct labor hours would be worked. The actual direct labor hours worked were 2,000 hours for Project I and 6,000 hours for Project II, for a total of 8,000 hours. Therefore, the amount of estimated overhead applied to Work in Process Inventory for the period is $64,000 x 8,000 hours / 10,000 hours = $51,200.

Preston Manufacturing Is Working on Two Housing Projects