Question

Nexus Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead...

Nexus Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. Last year, the company's estimated manufacturing overhead was $1,946,200 and its estimated level of activity was 52,600 direct labor-hours. The company's direct labor wage rate is $12 per hour. Actual manufacturing overhead amounted to $3,072,000, with actual direct labor cost of $1,020,000. For the year, manufacturing overhead was:

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Answer #1
Manufacturing overhead over applied $                73,000
Estimated manufacturing overhead $          19,46,200
Estimated level of activity 52600 (direct labour-hours)
labour wage rate $                        12
Actual manufacturing overhead $          30,72,000
actual direct labour cost $          10,20,000
Predetermined overhead rate =(Estimated total manufacturing overhead÷ Estimated total direct labour-hours)
Predetermined overhead rate 1946200/52600
Predetermined overhead rate $                        37
Actual direct labour-hours = Actual direct labour cost ÷ wage rate per hour
Actual direct labour-hours 1020000/12
Actual direct labour-hours 85000 (direct labour-hours)
Manufacturing overhead applied =Actual direct labour-hours× Predetermined overhead rate
Manufacturing overhead applied = (85000*37)
Manufacturing overhead applied = $          31,45,000
Less : Manufacturing overhead incurred $        -30,72,000
Manufacturing overhead over applied $                73,000
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