Simone uses a predetermined overhead application rate of $8 per direct labor hour. A review of the company's accounting records for the year just ended discovered the following:
Underapplied manufacturing overhead: $7,200
Actual manufacturing overhead: $392,000
Budgeted labor hours: 50,000
Simone's actual labor hours worked totaled:
A) 48,100.
B) 49,100.
C) 49,900.
D) 50,900.
E) cannot be determined based on the information presented.

Question

Quizplus · Accepted Answer

The predetermined overhead rate is $8 per direct labor hour. The actual manufacturing overhead is $392,000. The underapplied manufacturing overhead is $7,200. This means that the actual manufacturing overhead is $7,200 more than the applied manufacturing overhead. The applied manufacturing overhead is the predetermined overhead rate multiplied by the actual labor hours worked. Therefore, the actual labor hours worked is $392,000 / $8 = 49,000 hours.

Simone Uses a Predetermined Overhead Application Rate of $8 Per