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Sawyer Manufacturing Corporation uses a predetermined overhead rate based on direct labor-
hours to apply manufacturing overhead to jobs. Last year, the Corporation worked 30,000 actual
direct labor-hours and incurred $348,000 of actual manufacturing overhead cost. The
Corporation had estimated that it would work 29,000 direct labor-hours during the year and incur
$319,000 of manufacturing overhead cost. The Corporation's manufacturing overhead cost for
the year was:
overapplied by $18,000
overapplied by $11,000
underapplied by $18,000
underapplied by $11,000
Solution
Estimated Manufacturing overhead $319,000
Estimated Labor hours $29,000
Predetermined overhead rate $11 per labor hour
Actual Labor hours 30,000
Overhead applied ($11 x 30,000) $330,000
Actual Overhead incurred $348,000
Overhead under-applied $18,000 ($348,000 - $330,000)
Hence correct option is – Under-applied $18,000
Sawyer Manufacturing Corporation uses a predetermined overhead rate ba (1).docx

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Sawyer Manufacturing Corporation uses a predetermined overhead rate ba (1).docx

  • 1. Sawyer Manufacturing Corporation uses a predetermined overhead rate based on direct labor- hours to apply manufacturing overhead to jobs. Last year, the Corporation worked 30,000 actual direct labor-hours and incurred $348,000 of actual manufacturing overhead cost. The Corporation had estimated that it would work 29,000 direct labor-hours during the year and incur $319,000 of manufacturing overhead cost. The Corporation's manufacturing overhead cost for the year was: overapplied by $18,000 overapplied by $11,000 underapplied by $18,000 underapplied by $11,000 Solution Estimated Manufacturing overhead $319,000 Estimated Labor hours $29,000 Predetermined overhead rate $11 per labor hour Actual Labor hours 30,000 Overhead applied ($11 x 30,000) $330,000 Actual Overhead incurred $348,000 Overhead under-applied $18,000 ($348,000 - $330,000) Hence correct option is – Under-applied $18,000