Teresa Summerlin Teresa Summerlin manufactures hand-crafted pottery. Overhead is applied to products based on direct labor hours. At the beginning of the current year, Teresa estimated total overhead costs would be $30,000 and estimated direct labor hours would be 20,000. Actual overhead costs for the year totaled $36,000 for 18,000 actual direct labor hours.
Refer to the Teresa Summerlin information above. How much overhead was applied during the year?

Question

Quizplus · Accepted Answer

The overhead rate is calculated based on the estimates at the beginning of the year: $30,000 estimated overhead / 20,000 estimated direct labor hours = $1.50 per direct labor hour. Applied overhead for the year is then calculated using the actual direct labor hours: $1.50 per direct labor hour * 18,000 actual direct labor hours = $27,000.

Teresa Summerlin Teresa Summerlin Manufactures Hand-Crafted Pottery