Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 18

Estimate Hours Worked from Overhead Data

Valley Corporation estimated that direct labor for the year would be 58,500 hours. Valley’s overhead (all fixed) is applied on the basis of direct labor-hours. The company estimates its overhead costs at $234,000. During the year, all overhead costs were exactly as planned ($234,000). There was $7,800 in overapplied overhead.

Required

How many direct labor-hours were worked during the period? Show computations.

Step 1 of 2

Predetermined Overhead rate is the estimated manufacturing overhead for the coming year divided by the estimated activity of the allocation base for the year.

Allocation base for Corporation V is direct Labour cost.

Predetermined rate is calculated as under:

Therefore, the predetermined rate is 4