Baker Corporation applies manufacturing overhead on the basis of direct labor-ho

Question

Baker Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $73,140 and 2,300 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $75,290 and actual direct labor-hours were 2,200.

Baker Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $73,140 and 2,300 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $75,290 and actual direct labor-hours were 2,200.

Explanation / Answer

Predetermined overhead rate = Estimated overhead / estimated dirct labor hours

                                                   = $73,140 /2,300          = $31.80 per hour

Applied manufacturing overhead = 2,200 * $31.80   = $69,960

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