Sawyer Manufacturing Corporation uses a predetermined overhead rate based on dir
ID: 2332608 • Letter: S
Question
Sawyer Manufacturing Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, the Corporation worked 47,000 actual direct labor-hours and incurred $810,000 of actual manufacturing overhead cost. The Corporation had estimated that it would work 45,000 direct labor-hours during the year and incur $765,000 of manufacturing overhead cost. The Corporation's manufacturing overhead cost for the year was:
Sawyer Manufacturing Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, the Corporation worked 47,000 actual direct labor-hours and incurred $810,000 of actual manufacturing overhead cost. The Corporation had estimated that it would work 45,000 direct labor-hours during the year and incur $765,000 of manufacturing overhead cost. The Corporation's manufacturing overhead cost for the year was:
Explanation / Answer
Estimated manufacturing overhead cost = $765,000
Estimated direct labor-hours = 45,000
Predetermined overhead rate = Estimated manufacturing overhead cost / Estimated direct labor-hours
Predetermined overhead rate = $765,000 / 45,000
Predetermined overhead rate = $17.00
Actual direct labor-hours = 47,000
Manufacturing overhead applied = Predetermined overhead rate * Actual direct labor-hours
Manufacturing overhead applied = $17.00 * 47,000
Manufacturing overhead applied = $799,000
Actual manufacturing overhead = $810,000
Underapplied manufacturing overhead = Actual manufacturing overhead - Manufacturing overhead applied
Underapplied manufacturing overhead = $810,000 - $799,000
Underapplied manufacturing overhead = $11,000
The corporation’s manufacturing overhead cost for the year was underapplied by $11,000
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