Question

Farina Manufacturing uses a predetermined overhead application rate of $8 per direct labor hour. A review of the company's accounting records for the year just ended discovered the following: Underapplied manufacturing overhead: $7,200 Actual manufacturing overhead: $392,000 Budgeted labor hours: 50,000 Simone's actual labor hours worked totaled:

Answer 1

Answer:

Underapplied overhead = Actual overhead - Applied overhead

                         $7,200   = $392,000 - Applied overhead

       Applied overhead    = $392,000 - $7,200  

       Applied overhead    = $384,800

      Applied Overhead      = Overhead application rate x Actual labour hours

                    $384,800       =   $8 x Actual labour hours

                    $384,800      = Actual labour hours

                          $8    

      Actual labour hours    = 48,100 hours                      

Explanation:

In this question, we need to determine the overhead applied by using the underapplied overhead formula. The underapplied overhead and actual overhead were given, then, we will make overhead applied the subject of the formula. In the second case, we will derive the actual labour hours by dividing the overhead applied by overhead application rate.