The following budget data are available for Happy Company: If factory overhead is to be applied based on direct labor hours as the cost allocation base for the predetermined overhead rate, the amount of overhead applied into production is

Question

The following budget data are available for Happy Company:  If factory overhead is to be applied based on direct labor hours as the cost allocation base for the predetermined overhead rate, the amount of overhead applied into production is

Quizplus · Accepted Answer

To calculate the predetermined overhead rate, we need to divide the total estimated factory overhead by the estimated direct labor hours. Thus,

Predetermined overhead rate = $690,000 / 4,500 hours = $153.33 per direct labor hour

To calculate the amount of overhead applied into production, we need to multiply the predetermined overhead rate by the actual direct labor hours incurred. Thus,

Overhead applied = $153.33 per direct labor hour x 1,125 actual direct labor hours = $172,498.75

Therefore, the answer is C.

The Following Budget Data Are Available for Happy Company