Question

At the beginning of the year, manufacturing overhead for the year was estimated to be $764,325....

At the beginning of the year, manufacturing overhead for the year was estimated to be $764,325. At the end of the year, actual direct labor-hours for the year were 36,250 hours, the actual manufacturing overhead for the year was $740,000, and manufacturing overhead for the year was overapplied by $39,375. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been: (Do not round intermediate calculation.)

  • 32,587 direct labor-hours

  • 34,419 direct labor-hours

  • 35,550 direct labor-hours

  • 36,250 direct labor-hours

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Answer #1

Estimated manufacturing overhead = $764,325

Actual direct labor hour = $36,250

Actual manufacturing overhead = $740,000

Overhead applied manufacturing overhead = $39,375

Estimated direct labor hour = ?

Let Estimated direct labor hour be = Y

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

= 764,325/Y

Applied manufacturing overhead = Actual direct labor hour x predetermined overhead rate

= 36,250 x 764,325/Y

Over applied manufacturing overhead = Applied manufacturing overhead - Actual manufacturing overhead

39,375 = ( 36,250 x 764,325/Y) - 740,000

39,375 + 740,000 = 36,250 x 764,325/Y

779,375/36,250 = 764,325/Y

Y = 764,325/21.5

= 35,550 direct labor-hours

Hence estimated direct labor hour = 35,550

Third option is the correct option

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