Question

Dayflight applies overhead based on direct labour dollars in their Assembly Division. The company has budgeted 50,000 direct labour hours at a cost of $10 per hour and manufacturing overhead of $750,000 in the Assembly Division for the year. What is the Assembly Division’s predetermined overhead rate for the year?

A. $15.00 per direct labour dollar.

B. $10.00 per direct labour dollar.

C*. $ 1.50 per direct labour dollar.

D. $ 0.67 per direct labour dollar.

E. $ 0.07 per direct labour dollar.

Brainpower Pty Ltd is an Advertising Agency that uses a job costing system. Brainpower applies overhead to jobs based on direct professional labour hours. At the beginning of the year, overhead was estimated to be $75,000, direct professional labour hours were estimated to be 15,000, and direct professional labour cost was projected to be $225,000. During the year, Brainpower incurred actual overhead of $80,000, actual direct labour hours of 14,500, and actual direct labour cost of $222,000. What was Brainpower’s over- or under-applied overhead during the year?

A. $5,000 under-applied.

B. $5,000 over-applied.

C*. $7,500 under-applied.

D. $7,500 over-applied.

E. $3,000 over-applied.

Answer 1

1) Predetermined overhead rate = Estimated overhead / Estimated Direct labor dollars

Direct labou dollars = 50,000*10 = 500,000

Predetermiend overhead rate = 750,000 /500,000 = $1.50 Per Direct labou Dollar

Answer: C) $1.50 Per Direct labou Dollar

2) Predetermined overhead rate = Estimated overhead / Estimated Direct labor hours

= 75,000 /15,000 = $5 Per DLh

Overheads Applied = $5 *14,500 = 72,500

Under Applied of Overheads = 80,000-72,500 = 7,500

Answers :C) $7,500 Under Applied