Exercise 3-5 Ma

Exercise 3-5 : Apply overhead Luthan Company uses a predetermined overhead rate of $23.40 per direct labor-hour. This predetermined rate was based on 11,000 estimated direct labor-hours and $257,400 of estimated total manufacturing overhead. The company incurred actual total manufacturing overhead costs of $249,000 and 10,800 total direct labor-hours during the period. Required : Determine the amount of manufacturing overhead that would have been applied to units of product during the period

Answer : Predetermined overhead rate = Estimated total manufacturing overhead cost Estimated total amount of the allocation base = 257,400 11,000 =23.40/direct labor-hours Overhead applied = predetermined overhead rate X Actual direct labor-hours charged to job = 23.40 X 10,800 = $252,720