Wert Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs.Last year,the company's estimated manufacturing overhead was $1,200,000 and its estimated level of activity was 50,000 direct labor-hours.The company's direct labor wage rate is $12 per hour.Actual manufacturing overhead amounted to $1,240,000,with actual direct labor cost of $650,000.For the year,manufacturing overhead was:
A)overapplied by $60,000
B)underapplied by $60,000
C)overapplied by $40,000
D)underapplied by $44,000

Question

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total manufacturing overhead F1F1F1S1F1F1F10 Estimated total amount of the allocation base = $1,200,000 F1F1F1S1F1F1F10 50,000 direct labor-hours
= $24.00 per direct labor-hour
Wage rate per hour = Actual direct labor cost F1F1F1S1F1F1F10 Actual direct labor-hours
Actual direct labor-hours = Actual direct labor cost F1F1F1S1F1F1F10 Wage rate per hour
= $650,000 F1F1F1S1F1F1F10 $12.00 per direct labor-hour
= 54,166.67 direct labor-hours
Manufacturing overhead applied = Predetermined overhead rate F1F1F1S1F1F1F10 Actual direct labor-hours
= $24.00 per direct labor-hour F1F1F1S1F1F1F10 54,166.67 direct labor-hours
= $1,300,000
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Wert Corporation Uses a Predetermined Overhead Rate Based on Direct