Allen Corporation uses a predetermined overhead application rate of $.30 per direct labor hour.During the year it incurred $345,000 dollars of actual overhead,but it planned to incur $360,000 of overhead.The company applied $363,000 of overhead during the year.How many direct labor hours did the company plan to incur?
A)1,150,000
B)1,190,000
C)1,200,000
D)1,210,000

Question

Quizplus · Accepted Answer

The overhead rate is $.30 per direct labor hour, so if the company applied $363,000 of overhead, it means they used 1,210,000 direct labor hours (363,000 ÷ .30).
To find the planned direct labor hours, we can use the following formula:
Planned overhead ÷ overhead rate = planned direct labor hours
Planned overhead = $360,000
Overhead rate = $.30 per direct labor hour
$360,000 ÷ $.30 = 1,200,000 direct labor hours planned.

Allen Corporation Uses a Predetermined Overhead Application Rate of