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EA3.
LO 6.1A company estimated 100,000 direct labor hours and $800,000 in overhead. The actual overhead was $805,100, and there were 99,900 direct labor hours. What is the predetermined overhead rate, and how much was applied during the year?

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Answer:

Predetermined overhead rate=$8 per hour

Applied overheads=$799,200

Explanation:

Predetermined overhead rate is calculated using the following formula:

Predetermined overhead rate=Estimated overhead/Estimated direct labor hours

Predetermined overhead rate=800,000/100,000

                                              =$8 per hour

Applied overheads= Predetermined overhead rate*number of direct labor hours

Applied overheads=8*99,900

                             =$799,200

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