Question

At Becky's biscuit factory, manufacturing overhead is applied based on direct labor cost. At the beginning...

At Becky's biscuit factory, manufacturing overhead is applied based on direct labor cost. At the beginning of 2018, Becky's cost accountant estimated the following information for the year:

Total DM Costs: $800,000

Direct Labor Hours: 63,000 hours

Cost per DLH: $15/hour

Total Machine Hours: 3,150

Total MOH Costs: $692,000

At the end of 2018, the cost accountant noted that actual direct labor hours were 56,000, actual machine hours were 3,520, and the actual labor rate was $18.48. How much manufacturing overhead was applied?

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Answer #1

Answer:

Given that:

Manufacturing overhead is applied based on direct labor cost.

Estimated Manufacturing overhead cost = $692,000

Estimated direct labor cost = 63000 * $15 = $945,000

Predetermined overhead rate = Estimated Manufacturing overhead cost / Estimated direct labor cost

= 692000 / 945000

= 73.227513% of Direct labor cost

Actual labor cost = 56000 * 18.48 = $1,034,880

Manufacturing overhead applied = Actual labor cost * Predetermined overhead rate

=1034880 * 73.227513% = $757816.89

Manufacturing overhead applied = $757,816.89

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