Luthan Company uses a plantwide predetermined overhead rate of $22.20 per direct

Question

Luthan Company uses a plantwide predetermined overhead rate of $22.20 per direct labor-hour. This predetermined rate was based on a cost formula that estimated $266,400 of total manufacturing overhead cost for an estimated activity level of 12,000 direct labor-hours. The company incurred actual total manufacturing overhead cost of $270,000 and 10,400 total direct labor-hours during the period Required: Determine the amount of manufacturing overhead cost that would have been applied to all jobs during the period. Manufacturing overhead applied

Explanation / Answer

Ans.

Applied Manufacturing overhead = Actual Direct Labour-Hours x Predetermined Overhead Rate

Actual Direct Labour Hours = 10,400

Predetermined Overhead Rate = $22.20 per

Applied Manufacturing Overhead = 10,400 x 22.20 =$230,880

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