Davis Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $224,580 and the estimate of direct labor hours was 6,000. Job #145 was completed with 4 direct labor hours. How much overhead was applied to Job #145?
a.) 0.11
b.) 149.72
c.) 37.43
d.) 0
Answer: $149.72
Explanation:
Given that company uses direct labour hours as the basis for allocation of overhead.
Estimated Manufacturing Overhead= $224,580
Estimated direct labour hours= 6,000 hours
Therefore, Predetermined Overhead rate= Total estimated manufacturing overhead/ Total estimated labour hours
= 224,580 / 6,000
= $37.43 per direct labour hour
Number of Direct Labour hours used in Job #145= 4 hours
Therefore, Overhead applied to Job #145 = $37.43 * 4 hours
= $149.72
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