Question

At the beginning of the year, Wilson Company estimated the following: Overhead                        $360,000 Direct labor...

At the beginning of the year, Wilson Company estimated the following:

Overhead                        $360,000

Direct labor hours          40,000 hours

Machine hours                60,000 hours

Wilson uses normal costing and applies overhead on the basis of direct labor hours. For the month of May, direct labor hours worked were 4,200 and machine hours operated were 6,500. The actual overhead incurred for the month was $58,500.

Q1. What is the predetermined overhead rate?

Q2. May’s manufacturing overhead was:

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Answer #1

Budgted overhead = $360,000

Budgeted Direct labor hours = 40,000 hours

1.

predetermined overhead rate = Budgted overhead/Budgeted Direct labor hours

= 360,000/40,000

= $9 per direct labor hour

2.

Actual direct labor hours = 4,200

Manufacturing overhead = predetermined overhead rate x Actual direct labor hours

= 9 x 4,200

= $37,800

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