Luthan Company uses a predetermined overhead rate of $23.60 per direct labor-hou
ID: 2416965 • Letter: L
Question
Luthan Company uses a predetermined overhead rate of $23.60 per direct labor-hour. This predetermined rate was based on a cost formula that estimated $283,200 of total manufacturing overhead for an estimated activity level of 12,000 direct labor-hours.
The company incurred actual total manufacturing overhead costs of $266,000 and 11,500 total direct labor-hours during the period.
Determine the amount of manufacturing overhead that would have been applied to all jobs during the period.
Manufacturing overhead applied = ?
Luthan Company uses a predetermined overhead rate of $23.60 per direct labor-hour. This predetermined rate was based on a cost formula that estimated $283,200 of total manufacturing overhead for an estimated activity level of 12,000 direct labor-hours.
The company incurred actual total manufacturing overhead costs of $266,000 and 11,500 total direct labor-hours during the period.
Explanation / Answer
Calculation of the amount of manufacturing overhead applied for all jobs during the period:
Manufacturing overhead = Actual direct labor hours used × Predetermined overhead rate
= 11,500 hrs × $23.60
= $271,400.
Therefore, manufacturing overhead that would have been applied to all jobs during the period is $271,400.
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