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 estimated total factory overhead by the estimated total direct labor hours.

Predetermined overhead rate = Estimated total factory overhead/Estimated total direct labor hours

= ($690,000 + $30,000 + $45,000)/18,000

= $765,000/18,000

= $42.50 per direct labor hour

To find the amount of overhead applied to production, we need to multiply the predetermined overhead rate by the actual direct labor hours worked.

Overhead applied to production = Actual direct labor hours worked x Predetermined overhead rate

= 4,050 x $42.50

= $172,500

Therefore, the correct answer is C.

The Following Budget Data Are Available for Happy Company