Exercise 10A-3 Applying Overhead in a Standard Costing System [LO10-4] Privack C
ID: 2571016 • Letter: E
Question
Exercise 10A-3 Applying Overhead in a Standard Costing System [LO10-4] Privack Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below: Variable overhead cost per direct labor-hour $2.00 Total fixed overhead cost per year $615,000 Budgeted standard direct labor-hours (denominator level of activity) 102,500 Actual direct labor-hours 84,000 Standard direct labor-hours allowed for the actual output 81,000 Required: 1. Compute the predetermined overhead rate for the year. (Round your answers to the nearest whole number.) 2. Determine the amount of overhead that would be applied to the output of the period. (Round your answers to the nearest whole number.)
Explanation / Answer
1) Fixed Predetermine overhead rate = Fixed overhead cost/direct labour hours
= 615000/102500
Fixed predetermine overhead rate= 6 per direct labour hour
Total predetermine overhead rate = (6+2)=8 per direct labour hours
2) Overhead applied = 84000*8 = 672000
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