Question

At the beginning of the year, manufacturing overhead for the year was estimated to be $630,000. At the end of the year, actual direct labour-hours for the year were 35,900 hours, the actual manufacturing overhead for the year was $623,100, and manufacturing overhead for the year was over applied by $23,100. If the predetermined overhead rate is based on direct labour-hours, then the estimated direct labour hours at the beginning of the year used in the predetermined overhead rate must have been:

Select one:

a. 34,500 direct labour-hours

b. 33,333 direct labour-hours

c. 35,000 direct labour-hours

d. 35,900 direct labour-hours

e. 34,617 direct labour-hours

Answer 1

Estimated direct labor hours = ?

Estimated manufacturing overhead = $630,000

Actual direct labor hours = 35,900

Actual manufacturing overhead = $623,100

Overapplied manufacturing overhead = $23,100

Applied manufacturing overhead = Actual manufacturing overhead + Overapplied manufacturing overhead

= 623,100 + 23,100

= $646,200

Applied Overapplied manufacturing overhead = Actual direct labor hours x predetermined overhead rate

646,200 = 35,900 x predetermined overhead rate

predetermined overhead rate = $18 per direct labor hour

predetermined overhead rate =  Estimated manufacturing overhead/Estimated direct labor hours

18 = 630,000/Estimated direct labor hours

Estimated direct labor hours = 35,000 direct labor hours

Correct option is (c)