A company estimated 100,000 direct labor hours and P800,000 in overhead. The actual overhead wasP805,100, and there were 99,900 direct labor hours. What is the predetermined overhead rate, and how much was applied during the year?

A company estimated 100,000 direct labor hours and P800,000 in overhead. The actual overhead wasP805,100, and there were 99,900 direct labor hours. What is the predetermined overhead rate, and how much was applied during the year?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 3EB: A company estimated 50,000 direct labor hours and $450,000 in overhead. The actual overhead was...

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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

Question

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

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