16 of 55 (0 complete) This Test: 150 pts possible his Question: 3 pts Neptune Fa

Question

16 of 55 (0 complete) This Test: 150 pts possible his Question: 3 pts Neptune Fabrication Plant has provided you with the following information: Total manufacturing overhead costs estimated at the beginning of the year Total direct labor costs estimated at the beginning of the year Total direct labor hours estimated at the beginning of the year Actual manufacturing overhead costs for the year Actual direct labor costs for the year Actual direct labor hours for the year $243,000 $127,000 5,400 direct labor hours $245,000 $130,000 5,300 direct labor hours The company bases its manufacturing overhead allocation on direct labor hours. What was the unadjusted ending balance in the Manufacturing Overhead account? O A. $3,740 credit balance 0 B. $6,500 debit balance ° C. $3,740 debit balance OD. $6,500 credit balance

Explanation / Answer

Solution: Option B is correct i.e $ 6,500 debit balance

Working Note 1

Estimated Manufacturing overheads

$ 2,43,000

Estimated Direct Labour Hours

5,400 direct labour hours

Manufacturing overheads cost per direct labour hour

2,43,000/5400= $ 45/ direct labour hour

Working Note 2:

Manufacturing overheads allocated= $ 45/direct lab hour* Actual labour hours

                                                                   = $ 45/ direct lab hours * 5300 direct labour hours

                                                                    = $ 2,38,500

Working Note 3: Manufacturing Overheads a/c

Actual Manufacturing Overheads

$ 2,45,000

Applied Overheads Cost

$ 2,38,500

$ 6,500

$ 245000

$ 2,45,000

Estimated Manufacturing overheads

$ 2,43,000

Estimated Direct Labour Hours

5,400 direct labour hours

Manufacturing overheads cost per direct labour hour

2,43,000/5400= $ 45/ direct labour hour

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