Mackinaw Manufacturing Corporation uses a predetermined overhead rate based on d

Question

Mackinaw Manufacturing Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, the Corporation worked 19,200 actual direct labor-hours and incurred $138,000 of actual manufacturing overhead cost. They had estimated at the beginning of the year that 17,100 direct labor-hours would be worked and $136,800 of manufacturing overhead costs incurred. The Corporation had calculated a predetermined overhead rate of $8 per direct labor-hour. The Corporation's manufacturing overhead for the year was: O O O O overapplied by $15,600 underapplied by $15,600 overapplied by $1,200 underapplied by $1,200 26

Explanation / Answer

Correct answer--- Overapplied by $15,600.

Working Note

(A)

Estimated Overheads

$ 136,800.00

(B)

Estimated Direct Labor cost

17100

C= (A/B)

Predetermined Overhead rate

$ 8.00

(D)

Actual Direct Labor Hours

19200

E=(DxC)

Overheads Applied

$ 153,600.00

(F)

Actual Overheads

$ 138,000.00

G=(F-E)

Overheads Overapplied

$ 15,600.00

Overhead applied= Actual labor hours worked x Predetermined Overhead rate.

(A)

Estimated Overheads

$ 136,800.00

(B)

Estimated Direct Labor cost

17100

C= (A/B)

Predetermined Overhead rate

$ 8.00

(D)

Actual Direct Labor Hours

19200

E=(DxC)

Overheads Applied

$ 153,600.00

(F)

Actual Overheads

$ 138,000.00

G=(F-E)

Overheads Overapplied

$ 15,600.00

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