3 The Dewey Company uses a predetermined overhead rate to ap

3. The Dewey Company uses a predetermined overhead rate to apply manufacturing overhead to production. The rate is based on direct labor hours. Estimates for the year just ended are as follows: Estimated manufacturing overhead $240,000 Estimated direct labor hours 40,000 During the year Dewey Company used 37,000 direct labor hours. At the end of the year, Dewey Company records revealed the following information: Raw materials inventory Work-in-process inventory Finished goods inventory Cost of goods sold Manufacturing overhead costs incurred Required $ 35,000 60,000 105,000 400,000 210,000 a. Calculate the predetermined overhead rate for the year b. Determine the amount of overhead applied during the year Determine the amount of underapplied or overapplied manufacturing overhead for the year c.

Solution

1) predetermined overhead rate a) Formula : Estimated manufacturing overhead estimated direct labor hours 240,000 = 6 per direct labor hour 40,000 b) overhead applied during the year Formula: Actual direct labor hour* overhead rate 37,000 * $6          222,000 answer c) Overhead applied 222,000 overhead incurred 210,000 overhead over applied 12,000 answer