If the budgeted factory overhead cost is $460,000, the budgeted direct labor hours are 80,000, and the actual direct labor hours are 6,700 for the month, the amount of factory overhead to be allocated is $38,525 (if the allocation is based on direct labor hours). True/False

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Business

Kenya Castro

13 January, 08:21

If the budgeted factory overhead cost is $460,000, the budgeted direct labor hours are 80,000, and the actual direct labor hours are 6,700 for the month, the amount of factory overhead to be allocated is $38,525 (if the allocation is based on direct labor hours). True/False

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Teresa Keller · Answer 1

True

Explanation:

For computing the amount of factory overhead amount, first, we have to compute the predetermined overhead rate. The formula is shown below:

Predetermined overhead rate = (Total estimated manufacturing overhead) : (estimated direct labor-hours)

= $460,000 : 80,000 hours

= $5.75

Now the amount of factory overhead which equal to

= Actual direct labor-hours * predetermined overhead rate

= 6,700 hours * $5.75

= $38,525