Question

Question 1:

Maguire Corp used a predetermined overhead rate based on:

Estimated total fixed manufacturing overhead -  $50,000

Estimated direct labor hours - 8,000 hrs

The company's actual costs were:

Actual fixed manufacturing overhead - $55,000

Actual total direct labor hours - 9,000 hrs

The predetermined overhead rate is closest to:

A): $6.18

B) $5.55

C) $6.88

D): $6.25

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Question 2:

Brian Corp applied manufacturing overhead based on direct labor hours. Information regarding labor and manufacturing overhead is provided below:

MOH (Actual) $90,000

Estimated MOH $100,000

Direct Labor Incurred (2,400 hours x $20/hr) $48,000

Direct Labor Estimated (2,500 hours x $19/hr) $47,500

During the year, the manufacturing overhead was under or over-applied by:

A) $6,000 under-applied

B) $6,000 over-applied

C) $14,000 under-applied

D: $96,000 under-applied

Answer 1

Answer:

1)

Predetermined overhead rate            = Estimated total fixed manufacturing overhead / Estimated direct labor hours            = $ 50,000 / 8,000 DLH            =   $ 6.25

Predetermined overhead rate =   $ 6.25

Option (D) is Correct

2)

Predetermined overhead rate            = Estimated Manufacturing overhead / Estimated direct labor hours            = $ 100,000 / 2,500 DLH            =   $ 40

Applied Manufacturing overhead                 = Predetermined overhead rate x Direct Labor Incurred                 =   $ 40 x 2,400 DLH                 =   $ 96,000

Under or over-applied overhead          = Actual Manufacturing overhead (-) Applied Manufacturing overhead          =    $ 90,000 (-) $ 96,000          =    $ 6,000 (Over-applied )

Option (B) is Correct