Use this information for questions 2, 3, 4, & 5. A company that manufactures aut

Question

Use this information for questions 2, 3, 4, & 5. A company that manufactures automobiles applies manufacturing overhead on the basis of direct labor hours. For the month of August, the company estimated that it would incur $500,000 of manufacturing overhead and 50,000 direct labor hours. At the end of the month, the company realized it actually used 65,000 direct labor hours and incurred $450,000 of manufacturing overhead. The company pays workers $8 per direct labor hour, and used $330,000 in direct materials in August. At the beginning of the month, the balance in the Work in Process inventory account was $175,000 and at the end of the month, the balance in the Work in Process inventory account was $325,000.

Explanation / Answer

5 Manufacturing overhead applied = 500000/50000*65000 = $650000 Overapplied manufacturing overhead = 650000-450000 = $200000 Option 2 is correct

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