Question

Bayest Manufacturing Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, the Corporation worked 56,000 actual direct labor-hours and incurred $352,000 of actual manufacturing overhead cost. The Corporation had estimated that it would work 60,000 direct labor-hours during the year and incur $330,000 of manufacturing overhead cost. The Corporation's manufacturing overhead cost for the year was:

Answer 1

Answer:

$ 44000

Explanation:

Given:

Actual overhead manufacturing cost, Ac = $ 352000

Actual direct labor hours, Ah = 56000

Estimated manufacturing overhead cost, Ec = $ 330000

Estimated direct labor hour, Eh = 60000

Now,

Predetermined Overhead Rate = Ec/Eh

on substituting the values in the above formula we get

= $ 330000/60000 = 5.5

also,

Underapplied Overhead = Ac + (Ah × Predetermined Overhead Rate)

on substituting the values in the above formula we get

Underapplied Overhead = 352000 - (56000 × 5.5)

or

Underapplied Overhead = $ 44000

Answer 2

Based on the direct labor hours worked and the predetermined overhead rate, the manufacturing overhead cost for Bayest is $44,000 underapplied.

What is the manufacturing overhead cost?

First find the predetermined overhead rate:

= Estimated manufacturing overhead cost / Estimated labor hours

= 330,000 / 60,000

= $5.50 per labor hour

The overhead cost is:

= Actual overhead - Applied overhead

= 352,000 - (56,000 x 5.5 per hour)

= 352,000 - 308,000

= $44,000 underapplied

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