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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Predetermined Overhead Rate, Overhead Application

At the beginning of the year, Estes Company estimated the following costs:

Chapter 4, Problem 29BEB, Predetermined Overhead Rate, Overhead Application At the beginning of the year, Estes Company

Estes uses normal costing and applies overhead on the basis of direct labor cost. (Direct labor cost is equal to total direct labor hours worked multiplied by the wage rate.) For the month of September, direct labor cost was $46,300.

Required:

  1. 1. Calculate the predetermined overhead rate for the year.
  2. 2. Calculate the overhead applied to production in September.

1.

To determine

Calculate the predetermined overhead rate for the year.

Explanation

Predetermined Overhead Rate:

The amount which is calculated at the beginning of the accounting year for a related activity by dividing the total estimated annual overhead by estimated annual activity level is known as the predetermined overhead rate.

Use following formula to compute predetermined overhead rate for the year:

Predeterminedoverheadrate=EstimatedannualoverheadEstimated

2.

To determine

Calculate the overhead applied to production in September.

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