Burlington Brewery LTD. uses direct labor hours (DLH) in its predetermined overh

Question

Burlington Brewery LTD. uses direct labor hours (DLH) in its predetermined overhead rate. At the end of the year, the actual labor hours (DLH) were 3,440 hours and the total actual manufacturing overhead was $147,360. At the beginning of the year, estimated direct labor hours (DLH) for the year were 3,850 hours and the estimated manufacturing overhead for the year was $140,525. Calculate the Manufacturing Overhead balance at the end of the year and the journal entry to clear this amount if necessary, also indicate if it is under or over applied.

Explanation / Answer

Journal entry to clear under applied manufacturing overhead

Actual labor hours at the end of the year 3440 Total actual manufacturing overhead $147,360.00 Estimated labor hours for the year 3850 Estimated manufacturing overheads for the year $140,525.00 Estimated manufacturing overhead cost per labor hour (140525/3850) $36.50 Therefore, actual manufacturing overhead recovered ($36.50*3440) $125,560.00 Manufacturing overhead under applied (147360-125560) $21,800.00

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