Exercise 3-5 : Apply overhead

Luthan Company uses a predetermined overhead rate of $23.40 per direct labor-hour. This
predetermined rate was based on 11,000 estimated direct labor-hours and $257,400 of estimated
total manufacturing overhead.
The company incurred actual total manufacturing overhead costs of $249,000 and 10,800 total
direct labor-hours during the period.
Required :
Determine the amount of manufacturing overhead that would have been applied to units of
product during the period

Answer :
Predetermined overhead rate = Estimated total manufacturing overhead cost
Estimated total amount of the allocation base
= 257,400
11,000
=23.40/direct labor-hours
Overhead applied = predetermined overhead rate X Actual direct labor-hours charged to job
= 23.40 X 10,800
= $252,720