Crinks Corporation uses direct labor-hours in its predetermined overhead rate. A

Question

Crinks Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 11, 200 hours and the total estimated manufacturing overhead was $259,840. At the end of the year, actual direct labor-hours for the year were 10,800 hours and the actual manufacturing overhead for the year was $254,840. Overhead at the end of the year was: $4,280 overapplied $9,280 overapplied $9,280 underapplied $4,280 underapplied Predetermined overhead rate = Estimated total manufacturing overhead + Estimated total amount of the allocation base = $259,840 + 11, 200 direct labor-hours $23.20 per direct labor-hour

Explanation / Answer

Option D is correct.OVerhead at end of the year was under applied by $4,280.

Justification.

Actual manufacturing overhead = Actaul Direct labour hours x predetrmined rate = 10800 hrs x $23.20 = $250,560.

But as per data it is recorded as $254,840. Obviously it is underapplied.

As such, $254,840. - $250,560.= $4,280 underapplied

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