Question

Bagley Corporation expects to incur $450,000 of factory overhead and $600,000 of general and administrative costs next year. Direct labor costs at $20 per hour are expected to total $200,000.

If factory overhead is to be applied per direct labor hour, how much overhead will be applied to a job incurring 40 hours of direct labor?

$Answer

Answer 1

Answer

--Total expected direct labor hours = $ 200000 labor cost / $ 20 rate = 10000 DLH

--Overhead application rate = $ 450000 expected overhead / 10000 DLHs = $ 45 per DLHs

--Overhead applied to a Job incurring 40 hours = 40 hours x $ 45 = $ 1800 Answer