Question

Nexus Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. Last year, the company's estimated manufacturing overhead was $1,200,000 and its estimated level of activity was 50,000 direct labor-hours. The company's direct labor wage rate is $12 per hour. Actual manufacturing overhead amounted to $1,240,000, with actual direct labor cost of $650,000. For the year, manufacturing overhead was:

Answer 1

Answer:

$60,000

Explanation:

Calculation for what manufacturing overhead was:

First step is to calculate the Predetermined overhead rate

Estimated total manufacturing overhead $1,200,000

÷ Estimated total direct labor-hours 50,000

direct labor-hours

Predetermined overhead rate=$24.00per direct labor-hour($1,200,000÷50,000)

Second step is to calculate Actual direct labor-hours

Actual direct labor-hours = $650,000 ÷ $12.00 per direct labor-hour

Actual direct labor-hours = 54,166.67 direct labor-hours

Now let calculate Manufacturing overhead

Manufacturing overhead applied$1,300,000

(54,166.67*$24.00)

Less Manufacturing overhead incurred(1,240,000)

Manufacturing overhead $60,000 Overapplied

Therefore manufacturing overhead was:$60,000