Luthan Company uses a plantwide predetermined overhead rate of $23.40 per direct
ID: 2601448 • Letter: L
Question
Luthan Company uses a plantwide predetermined overhead rate of $23.40 per direct labor-hour. This predetermined rate was based on a cost formula that estimated $280,800 of total manufacturing overhead cost for an estimated activity level of 12,000 direct labor-hours. The company incurred actual total manufacturing overhead cost of $267,000 and 11,500 total direct labor-hours during the period. Required: Determine the amount of manufacturing overhead cost that would have been applied to all jobs during the period.
Explanation / Answer
Calculation of amount of manufacturing overhead cost applied:
Manufacturing overhead applied = Actual direct labor-hours x Predetermined overhead rate
= 11,500 x 23.40 = $269,100
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