If you can please show me how you got this answer, I will greatly appreciate it.

Question

If you can please show me how you got this answer, I will greatly appreciate it.

Kris Company calculates its predetermined rates using practical volume, which is 325,000 units. The standard cost system allows 3 direct labor hours per unit produced. Overhead is applied using direct labor hours. The total budgeted overhead is $4,260,000, of which $994,000 is fixed overhead. The actual results for the year are as follows:
Units produced: 318,000
Direct labor: 965,000 hours @ $12/hour
Variable overhead: $3,302,000
Fixed overhead: $998,000

Calculate the applied fixed overhead.

Explanation / Answer

Hi,

Please find the answer as follows:

Predetermined Fixed Overhead Rate= Budgeted Fixed Overhead/Budgeted Hours = 994000/(325000*3) = 1.02

Applied Fixed Overhead = Actual Units Produced*Standard Hours Per Unit*Predetermined Fixed Overhead = 318000*3*1.02 = 973080

Option C is the correct answer.

Thanks.

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