Golden Corporation uses direct labor-hours in its predetermined overhead rate.At the beginning of the year,the estimated direct labor-hours were 21,600 hours.At the end of the year,actual direct labor-hours for the year were 20,400 hours,the actual manufacturing overhead for the year was $506,920,and manufacturing overhead for the year was underapplied by $23,440.The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been:

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated as estimated manufacturing overhead divided by estimated direct labor-hours. The underapplied overhead is the difference between actual overhead and applied overhead. Given that overhead was underapplied by $23,440, the applied overhead was $506,920 - $23,440 = $483,480. Using the actual direct labor-hours (20,400), the predetermined rate is $483,480 / 20,400 = $23.70 per hour. Applying this rate to the estimated hours (21,600), the estimated overhead is 21,600 * $23.70 = $511,920.

Golden Corporation Uses Direct Labor-Hours in Its Predetermined Overhead Rate