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 your intermediate calculation.)
A)$51,200.
B)$64,000.
C)$54,400.
D)$44,000.

Question

Quizplus · Accepted Answer

The overhead rate is calculated as $64,000 / 10,000 hours = $6.40 per hour. Total direct labor hours worked is 2,000 + 6,000 = 8,000 hours. Therefore, the overhead applied is 8,000 hours * $6.40/hour = $51,200.

Preston Manufacturing Is Working on Two Housing Projects