Nadal Company is debating the use of direct labor cost or direct labor hours as
ID: 2392701 • Letter: N
Question
Nadal Company is debating the use of direct labor cost or direct labor hours as the cost allocation base for allocating manufacturing overhead. The following information is available for the most recent? year: Actual direct labor hours ? $232,900 Estimated direct labor hours ? $251,000 Actual manufacturing overhead costs ?$350,600 Estimated manufacturing overhead costs ?$450,560 Actual direct labor cost ?$465,300 Estimated direct labor cost ?$512,000 If Nadal Company uses direct labor cost as the allocation? base, what would the allocated manufacturing overhead be for the? year?
A. ?$350,600 B. ?$409,464 C. ?$728,085 D. ?$450,560
Explanation / Answer
The Predetermined Overhead rate using the direct labor cost as the allocation? base = Estimated manufacturing overhead costs / Estimated direct labor cost * 100
= ?$450,560 / $512,000 * 100
= 88%
The allocated manufacturing overhead be for the? year = Predetermined Overhead rate using the direct labor cost as the allocation? base * Actual direct labor cost
= 88 % * $465,300
= $ 409,464
Hence, the correct answer is B. $ 409,464
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