Dowan Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs.During the year,Dowan Company incurred $156,600 in actual manufacturing overhead cost.The Manufacturing Overhead account showed that overhead was underapplied by $12,600 for the year.If the predetermined overhead rate is $6.00 per direct labour-hour,how many hours did the company work during the year?
A) 24,000 hours.
B) 25,000 hours.
C) 26,000 hours.
D) 28,200 hours.

Question

Quizplus · Accepted Answer

The predetermined overhead rate is $6.00 per direct labor hour. The actual manufacturing overhead cost incurred was $156,600. The manufacturing overhead account showed that overhead was underapplied by $12,600. This means that the company applied $12,600 less overhead to jobs than it actually incurred. To calculate the number of direct labor hours worked, we can use the following formula:Direct labor hours = (Actual manufacturing overhead cost + Underapplied overhead) / Predetermined overhead rateDirect labor hours = ($156,600 + $12,600) / $6.00Direct labor hours = $169,200 / $6.00Direct labor hours = 28,200 hoursTherefore, the company worked 28,200 hours during the year.

Dowan Company Uses a Predetermined Overhead Rate Based on Direct