Question

At the beginning of the year, manufacturing overhead for the year was estimated to be $1,052,700. At the end of the year, actual direct labor-hours for the year were 36,400 hours, the actual manufacturing overhead for the year was $990,000, and manufacturing overhead for the year was overapplied by $65,600. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been: (Do not round intermediate calculation.)

Answer 1

36,300 hours

Explanation:

For computing the estimated direct labor hours first we need to find out the manufacturing overhead applied and predetermined overhead applied which is shown below:-

Manufacturing overhead applied = Actual Overhead + Over applied Overhead

= $990,000 + $65,600

= $1,055,600

and

Predetermined overhead rate = Manufacturing overhead applied ÷ Actual direct labor hours

= $1,055,600 ÷ 36,400 hours

= 29

So,

Estimated direct labor hours = Estimated total manufacturing Overhead ÷ Predetermined overhead rate

= $1,052,700 ÷ 29

= 36,300 hours

So, for computing the estimated direct labor hours we simply applied the above formula.