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20 January, 17:44

Ashland Corporation estimates its manufacturing overhead costs to be $170,000 and its direct labor costs to be $324,000 for 2020. The actual manufacturing labor costs were $82,000 for Product 1, $123,000 for Product 2 and $162,000 for Product 3 during 2020. Manufacturing overhead is allocated to products on the basis of direct labor costs using a predetermined overhead rate. The actual manufacturing overhead cost for the year was $174,000. The amount of overhead assigned to Product 3 during 2020 was:

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  1. 20 January, 18:36
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    85,001

    Explanation:

    The computation of amount of overhead assigned to Product 3 during 2020 is shown below:-

    Predetermined overhead rate = Estimated manufacturing overhead costs : Estimated direct labor costs

    = $170,000 : $324,000

    = 0.5247

    Amount of overhead assigned to Product 3 = Actual manufacturing costs for Product 3 * Predetermined overhead rate

    = $162,000 * 0.5247

    = 85,001

    So, we have applied the above formula.
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