Baker Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $210,600 and 6,000 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $209,000 and actual direct labor-hours were 5,980. The applied manufacturing overhead for the year was closest to:

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated by dividing total estimated overhead by estimated direct labor-hours:

$210,600 / 6,000 = $35 per direct labor-hour

To determine the amount of overhead to apply to actual production, you multiply the actual direct labor-hours used by the predetermined overhead rate:

5,980 actual direct labor-hours x $35 per direct labor-hour = $209,300 applied overhead

Since actual overhead was $209,000, the applied overhead was slightly greater than the actual overhead. The closest answer choice is C, $209,898.

Baker Corporation Applies Manufacturing Overhead on the Basis of Direct