Brief Exercise 16-1 Digger Inc. sells a high-speed retrieval system for mining i

Question

Brief Exercise 16-1 Digger Inc. sells a high-speed retrieval system for mining information. It provides the following information for the year Actual Overhead cost Machine hours Direct labor hours $1,440,540 55,700 106,000 $1,415,540 49,100 101,400 Overhead is applied on the basis of direct labor hours. Compute the predetermined overhead rate. (Round answer to 2 decimal places, e.g. 12.25.) Predetermined overhead Determine the amount of overhead applied for the year. Amount of overhead applied rate per direct labor hour

Explanation / Answer

(a) Predetermined overhead rate = Estimated annual overhead costs / Expected annual operating activity = $1,440,540 / 106,000 = $13.59 per direct labor hour

(b) Amount of overhead applied = 101,400 direct labor hours × $13.59 = $1,378,026

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