2. The Dewey Company uses a predetermined overhead rate to apply manufacturing o

Question

2. The Dewey Company uses a predetermined overhead rate to apply manufacturing overhead to production. The rate is based on direct labor hours. Estimates for the year just ended are as follows: Estimated manufacturing overhead $240,000 Estimated direct labor hours 40,000 During the year Dewey Company used 37,000 direct labor hours. At the end of the year, Dewey Company records revealed the following information: Raw materials inventory $ 35,000 Work-in-process inventory 60,000 Finished goods inventory 105,000 Cost of goods sold 400,000 Manufacturing overhead costs incurred 210,000 Required: a. Calculate the predetermined overhead rate for the year. b. Determine the amount of overhead applied during the year. c. Determine the amount of underapplied or overapplied manufacturing overhead for the year.

Explanation / Answer

a. predetermined overhead rate for the year = $240,000/40,000 =$6/hr b. amount of overhead applied during the year = 6*37,000 =$222,000 c. amount of overapplied manufacturing overhead for the year = $222,000- 210,000 =$12,000

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