Pinnini Co. uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, Pinnini Company incurred $225,000 in actual manufacturing overhead cost. Overhead was overapplied $14,500 for the year. If the predetermined overhead rate was $5.00 per direct labor-hour, how many hours did the company work during the year?

Question

Quizplus · Accepted Answer

The formula to calculate applied overhead is:

Applied Overhead = Predetermined Overhead Rate x Actual Direct Labor Hours

We can use this formula to find the actual direct labor hours:

$5.00 per direct labor hour = ($225,000 - $14,500) / Direct Labor Hours

$4.78 per direct labor hour = $210,500 / Direct Labor Hours

Direct Labor Hours = $210,500 / $4.78 per direct labor hour

Direct Labor Hours = 44,037.24

The company worked approximately 47,900 hours (rounded to the nearest hundred) during the year.