Question

Crich Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 21,820 hours and the total estimated manufacturing overhead was $501,860. At the end of the year, actual direct labor-hours for the year were 21,550 hours and the actual manufacturing overhead for the year was $501,860. Overhead at the end of the year was:
a. $1,390 underapplied
b. $1,340 overapplied
c. $1,340 underapplied
d. $1,390 overapplied

Answer 1

Answer:

The answer is: NONE OF THE ABOVE, IT SHOULD BE $6,210 underapplied

Explanation:

First we calculate the estimated cost per direct labor hour:

• $501,860 / 21,820 = $23 per direct labor hour

If only 21,550 direct labor hours were employed, then the estimated cost for total labor hours should have been $495,650 (= $23 x 21,550), but instead the total cost was $501,860 which is $6,210 underapplied. The actual cost per direct labor hour is $23.29 (= $510,860 / 21,550).