Bambie Ltd. applies overheads based on direct labour hours. The company has budgeted 50 000 direct labour hours at a cost of $10 per hour, and manufacturing overhead of $750 000 in the assembly division for the year. The actual direct labour hours used for the year turns out to be 47 000 hours. What is the applied overhead for the year?
A) $705 000
B) $70 500
C) $750 000
D) 500 000

Question

Quizplus · Accepted Answer

The applied overhead is calculated based on the budgeted overhead rate, which is $750,000 / 50,000 hours = $15 per direct labor hour. For 47,000 actual hours, the applied overhead is 47,000 hours * $15/hour = $705,000.