Rector Company manufactures a line of lightweight running shoes. CEO Mark Rector estimated that the company would incur $2,500,000 in manufacturing overhead during the coming year. When Rector Company uses direct labor hours as its manufacturing overhead application base, predetermined overhead rate is $10.00/DLH and when it uses machine hours as its manufacturing overhead application base, predetermined overhead rate is $6.25/MH. Additionally, he estimated the company would operate at a level requiring 250,000 direct labor hours and 400,000 machine hours. At the end of the year, Rector Company had worked 245,000 direct labor hours, used 410,000 machine hours, and incurred $2,515,000 in manufacturing overhead.

If Rector Company used direct labor hours as its manufacturing overhead application base, how much overhead was applied to jobs during the year?

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Business

Madeleine Fisher

22 November, 15:21

Rector Company manufactures a line of lightweight running shoes. CEO Mark Rector estimated that the company would incur $2,500,000 in manufacturing overhead during the coming year. When Rector Company uses direct labor hours as its manufacturing overhead application base, predetermined overhead rate is $10.00/DLH and when it uses machine hours as its manufacturing overhead application base, predetermined overhead rate is $6.25/MH. Additionally, he estimated the company would operate at a level requiring 250,000 direct labor hours and 400,000 machine hours. At the end of the year, Rector Company had worked 245,000 direct labor hours, used 410,000 machine hours, and incurred $2,515,000 in manufacturing overhead.

If Rector Company used direct labor hours as its manufacturing overhead application base, how much overhead was applied to jobs during the year?

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Answers (1)

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Keyon Spears · Answer 1

Allocated MOH = $2,450,000

Explanation:

Giving the following information:

The predetermined overhead rate is $10.00/DLH

Actual direct labor hours = 245,000 direct labor hours

We were provided with the predetermined overhead rate, we need to allocate overhead to the period based on actual direct labor hours:

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

Allocated MOH = 10*245,000

Allocated MOH = $2,450,000