The Murray Corporation uses a standard cost system in which it applies manufactu
ID: 2484923 • Letter: T
Question
The Murray Corporation uses a standard cost system in which it applies manufacturing overhead on the basis of standard direct labor-hours (DLHs). The company recorded the following activity and cost data for May:
Activity:
Number of units produced………..40,100 units
Std. direct labor hours per unit of product……..1.5 DLH per unit
Denominator activity…….64,000 DLHs
Cost:
Actual fixed manufacturing overhead costs incurred……$56,000
Fixed component of predet. Overhead rate………..$0.90 per DLH
The amount of fixed manufacturing overhead cost that was used to compute the fixed component of the predetermined overhead rate was:
$54,135
$60,150
$59,465
$57,600
Please show all work
Explanation / Answer
Answer is $54,135
Predetermined overhead rate= Estmated total manufacturing overhead cost / Estimated total amount of allocation base
$0.90 =Estmated total manufacturing overhead cost / (40,100 units*1.5DLH)
$0.90 =Estmated total manufacturing overhead cost / 60,150DLH)
Estmated total manufacturing overhead cost = $0.90 * 60,150DLH
Estmated total manufacturing overhead cost =$54,135