Daffe Corporation Uses Direct Labor-Hours in Setting Its Predetermined Overhead

question 57

Essay

Daffe Corporation uses direct labor-hours in setting its predetermined overhead rate.At the beginning of the year,the total estimated manufacturing overhead was $165,600.At the end of the year,actual direct labor-hours for the year were 11,900 hours,manufacturing overhead for the year was overapplied by $10,760,and the actual manufacturing overhead was $160,600.
Required:
What must have been the predetermined overhead rate for the year?
$$\begin{array} { | l | l | l | } \hline & \text { Actual manufacturing } & \begin{array} { l } \text { Overapplied manufacturing } \\\text { overhead }\end{array} \\\text { Answer: } & \text { overhead } = & \\\text { Applied manufacturing } \\\text { overhead - }\\\hline \end{array}$$

---

Definitions:

High-Low Method

A technique in cost accounting used to estimate fixed and variable cost components of a product or service based on the highest and lowest levels of activity.

Variable Cost Elements

Expenses that change in proportion to the amount of goods produced or the volume of sales.

Fixed Cost Elements

Costs that do not change with the level of production or sales activity within a certain range or over a certain period.

Telephone Costs

Expenses related to the usage of telecommunication services by a business, categorized as utility expenses and recorded in the income statement.