16 Sawyer Manufacturing Corporation uses a predetermined overhead rate based on

Question

16 Sawyer Manufacturing Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, the Corporation worked 49.000 actual direct labor-hours and incurred $658000 of actual manufacturing overhead cost The Corporation had estimated that it would work 47000 direct labor-hours during the year and incur $611,000 of manufacturing overhead cost. The Corporation's manufacturing overhead cost for the year was: O overapplied by $26,000 O underapplied by $26.000 O underapplied by $21000 O overapplied by $21,000

Explanation / Answer

Predetermined overhead rate=Estimated overheads/Estimated direct labor hours

=(611000/47000)=$13

Hence applied overheads=(13*49000)=$637000

Hence underapplied overheads=(658000-637000)=$21000(C).

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