Bravo Company uses a predetermined overhead rate to apply manufacturing overhead to production. The rate is based on direct labor hours.
Beginning of the year estimates for the year just ended were as follows:
Estimated manufacturing overhead .........$240,000
Estimated direct labor hours ...........$40,000
During the year, Bravo used a total of $37,000 direct labor hours. At the end of the year, Bravo's records revealed the following information:
Raw materials inventory ............$35,000
Work in process inventory ............$60,000
Finished goods inventory ..............$105,000
Cost of goods sold ...............$400,000
Manufacturing overhead costs incurred ....... $210,000
1. Compute the predetermined overhead rate for the year.
2. Determine the amount of overhead applied to production during the year.
3. The amount of under applied or over applied manufacturing overhead for the year.