Folio Company estimates total manufacturing overhead costs to be $80,000 for the year and estimates direct labor hours to be 4,000 for the same period. Actual direct labor hours for the period are 3,800 and actual overhead costs for the period are $83,000. What was the amount assigned to the work in process inventory account for the period?

Question

Business

Madyson Munoz

13 August, 11:26

Folio Company estimates total manufacturing overhead costs to be $80,000 for the year and estimates direct labor hours to be 4,000 for the same period. Actual direct labor hours for the period are 3,800 and actual overhead costs for the period are $83,000. What was the amount assigned to the work in process inventory account for the period?

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Caroline Mora · Answer 1

Allocated Overhead = $76,000

Explanation:

Giving the following information:

Estimated overhead for the period = $80,000

Estimated direct labor hours = 4,000 for the same period

Actual direct labor hours for the period are 3,800.

First, we need to calculate the estimated overhead rate. Then, we can determine the amount of overhead allocated to work in process for the period.

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

Estimated manufacturing overhead rate = 80,000/4,000 = $20 per direct labor hour

Now, we can allocate overhead:

Allocated MOH = Estimated manufacturing overhead rate * Actual amount of allocation base

Allocated MOH = 20*3,800 = $76,000