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14 April, 20:56

Dagger Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $231,750. At the end of the year, actual direct labor-hours for the year were 17,500 hours, manufacturing overhead for the year was underapplied by $12,500, and the actual manufacturing overhead was $227,750. The predetermined overhead rate for the year must have been closest to:

1) $12.96

2) $12.30

3) $13.24

4) $11.43

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  1. 14 April, 23:11
    0
    Predetermined overhead rate of the year = $12.3

    Option 2 is correct.

    Step-by-step explanation:

    Let P = Predetermined overhead

    Actual direct labor hours = 17,500

    So, applied overhead = (17,500 * P)

    Actual overhead = 227,750

    Under applied overhead = 12,500

    Applied Overhead = Actual overhead - Under applied overhead

    Applied Overhead = 227,750 - 12500

    Applied Overhead = 215,250

    Using Formula:

    215250 = (17,500 * P)

    => P = 215250/17500

    P = 12.3

    So, Predetermined overhead rate of the year = $12.3

    Option 2 is correct.
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