A manufacturing company has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:
| Denominator level of activity | 6,800 | DLHs | |
| Overhead costs at the denominator activity level: | |||
| Variable overhead cost | $ | 31,710 | |
| Fixed overhead cost | $ | 96,810 | |
The following data pertain to operations for the most recent period:
| Actual hours | 7,000 | DLHs | |
| Standard hours allowed for the actual output | 6,984 | DLHs | |
| Actual total variable manufacturing overhead cost | $ | 30,890 | |
| Actual total fixed manufacturing overhead cost | $ | 97,430 | |
The overhead applied to products during the period was closest to:
Multiple Choice
Explanation
Variable overhead + Fixed overhead = $31,710 + $96,810
Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $128,520 ÷ 6,800 MHs = $18.90 per MH
Overhead applied = Predetermined overheard rate × Standard hours allowed for the actual output
= $18.90 per MH × 6,984 MHs = $131,997.60
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