Question

Adams Manufacturing allocates overhead to production on the basis of direct labor costs. At the beginning of the year, Adams estimated total overhead of $343,500; materials of 419,000 and direct labor of $229,000. During the year Adams incurred $427,000 in materials costs, $414,100 in overhead costs and $233,000 in direct labor costs. Compute the amount of overhead applied to jobs during the year.

Answer 1

Answer:

Applied overhead 349,500

Explanation:

$\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate$

To calculate the manufacturing overhead rate we will distribute the expected overhead cost over a cost driver.

For this case, the overhead will be 343,500

and the cost driver is the direct labor cost 229,000

overhead rate: 343,500 / 229,000 = 1.5

Applied overhead during the year:

actual cost driver x predeterminate rate

actual labor cost  233,000 x 1.5 = 349,500