Question

Wilson Enterprises applies overhead based on direct labor cost. The company estimates that their overhead for the year will be $240,000, and direct labor cost to be $300,000. Actual direct labor cost for Martinez Manufacturing was $280,000 and actual overhead costs were $220,000. At the end of the year, manufacturing overhead was:

Answer 1

Applied Overhead is higher than actual overhead. Hence, manufacturing overhead is $ 4,000

Step-by-step explanation:

Given data:

estimated overhead = $2,40,000

Labor cost =$2,80,000

Direct labor cost = $3,00,000

`Overhead\  rate = (Estimated\  Overhead)/(Estimated\ direct\ labor\ cost)`

`= (2,40,000)/(3,00,000)`

= $ 0.80 per direct labor cost

`Applied\ Overhead = Actual\  Labor\ cost* Overhead\ rate`

`= $ 2,80,000* $ 0.80 Per direct labor cost`

=$ 2,24,000

Actual Overhead cost = $ 2,20,000

Applied Overhead is more than actual overhead. Hence, manufacturing overhead is $ 4,000.