Logan products computes its predetermined overhead rate annu

Logan products computes its predetermined overhead rate annually on the basis of direct labor hours. At the beginning of the year it estimated that its total manufacturing overhead cost would be $600,000 and the estimated total direct labor hours (allocation base) would be 200,000. Its actual overhead for the year was $590,000 and its actual total direct labor hours was 120,000. Calculate the applied amount.

Solution

Answer:

Predetermined Overhead rate = Estimated Manufacturing Overhead / Estimated Total Direct Labor Hours
Predetermined Overhead rate = 600,000 / 200,000
Predetermined Overhead rate = $3

Applied Overhead = $3 * 120,000
Applied Overhead = $360,000