At the beginning of the year, managers at King Industries estimated $400,000 in manufacturing overhead, 20,000 direct labor hours, and 30,000 machine hours. Actual manufacturing costs at the end of the year were $425,000 in manufacturing overhead. During the year, 22,000 direct labor hours and 27,000 machine hours were incurred. If King Industries uses a normal costing system, and if overhead is applied based on direct labor hours, how much overhead was applied during the year?

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Business

Lyla Atkins

9 April, 18:17

At the beginning of the year, managers at King Industries estimated $400,000 in manufacturing overhead, 20,000 direct labor hours, and 30,000 machine hours. Actual manufacturing costs at the end of the year were $425,000 in manufacturing overhead. During the year, 22,000 direct labor hours and 27,000 machine hours were incurred. If King Industries uses a normal costing system, and if overhead is applied based on direct labor hours, how much overhead was applied during the year?

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Patricia Dorsey · Answer 1

Allocated Overhead = $440,000

Explanation:

Giving the following information:

The estimated overhead = $400,000

Estimated direct labor hours = 20,000

Actual direct labor hours = 22,000 direct labor hours

First, we need to calculate the estimated overhead rate. Then, allocate overhead based on actual direct labor hours:

Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

Estimated manufacturing overhead rate = 400,000/20,000 = $20 per direct labor hour

Now, we can allocate overhead:

Allocated MOH = Estimated manufacturing overhead rate * Actual amount of allocation base

Allocated MOH=20*22,000 = $440,000