Forsyth Company uses estimated direct labor hours of 150,000 and estimated manuf

Question

Forsyth Company uses estimated direct labor hours of 150,000 and estimated manufacturing overhead costs of $337,500 in establishing its 2012 predetermined manufacturing overhead rate. Actual results showed: Actual manufacturing overhead $346,500 Allocated manufacturing overhead $343,800 The number of direct labor hours worked during the period was: Davie Company used estimated direct labor hours of 180,000 and estimated manufacturing overhead costs of $990,000 in establishing its 2012 predetermined manufacturing overhead rate. Actual results showed: Actual manufacturing overhead $950,000 allocated manufacturing overhead $962,500

Explanation / Answer

1)

Allocated MOH = Predetermined overhead rat * Actual Direct labor hours

343,800 = 337,500 /150,000 * Actual DLH

Actual DLH = 152,800

2)

Predetermined Overhead rate = Estimated MOH / Estimated Direct Labor Hour

= $990,000 /180,000 DLH = $5.5 / DLH

Allocated MOH = Predetermined Overhead rate * Direct labor Hour

962,500 = 5.5 Direct labor Hour

DLH = 962,500 / 5.5 = 175,000

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