Dagger Corporation uses direct labor-hours in its predetermined overhead rate. A
ID: 2424806 • Letter: D
Question
Dagger Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $241,640. At the end of the year, actual direct labor-hours for the year were 16,800 hours, manufacturing overhead for the year was underapplied by $13,200, and the actual manufacturing overhead was $236,640. The predetermined overhead rate for the year must have been closest to:
Dagger Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $241,640. At the end of the year, actual direct labor-hours for the year were 16,800 hours, manufacturing overhead for the year was underapplied by $13,200, and the actual manufacturing overhead was $236,640. The predetermined overhead rate for the year must have been closest to:
Explanation / Answer
The actual manufacturing overhead was $236,640 and the manufacturing overhead for the year was under-applied by $13,200. This means that the manufacturing overhead applied for the year was $223,440 ($236,640 - $13,200).
Actual direct labor-hours for the year were 16,800 hours.
Predetermined overhead rate should be computed by dividing the actual manufacturing overhead by the actual number of direct labor-hours.
Therefore,
Predetermined overhead rate = $223,440 / 16,800 direct labor-hours = $13.30 per direct labor-hour
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