LO 6.1Active Frame, Inc., manufactures clear and tinted sport glasses. The manufacturing of clear glasses takes 45,000 direct labor hours and involves 1,700 parts and 115 inspections. The manufacturing of tinted glasses takes 115,000 direct labor hours and involves 1,400 parts and 450 inspections. The traditional method applies $560,000 of overhead on the basis of direct labor hours. What is the amount of overhead per direct labor hour applied to the clear glass products?

$933.33

$157,500

$322.500

$402,500

The correct answer is B.

Explanation:

Giving the following information:

The manufacturing of clear glasses takes 45,000 direct labor hours. The traditional method applies $560,000 of overhead based on direct labor hours.

We need to calculate the manufacturing overhead rate:

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

Estimated manufacturing overhead rate = 560,000 / (45,000 + 115,000) = $3.5 per direct labor hour

Now, we can allocate the overhead to clear glasses:

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

Allocated MOH = 3.5*45,000 = $157,500