Archangel Manufacturing Uses a Predetermined Overhead Allocation Rate Based on a Percentage

question 59

Multiple Choice

Archangel Manufacturing uses a predetermined overhead allocation rate based on a percentage of direct labor costs. The following are the details of production during the year: $$\begin{array} { | l | r | } \hline \begin{array} { l } \text { Total manufacturing overhead estimated at the beginning of } \\\text { the year }\end{array} & \$ 140,000 \\\hline \text { Total direct labor costs estimated at the beginning of the year } & \$ 350,000 \\\hline \text { Total direct labor hours estimated at the beginning of the year } & 12,000 \text { direct labor hours } \\\hline \text { Actual manufacturing overhead costs for the year } & \$ 159,000 \\\hline \text { Actual direct labor costs for the year } & \$ 362,000 \\\hline \text { Actual direct labor hours for the year } & 12,400 \text { direct labor hours } \\\hline\end{array}$$ Calculate the amount of manufacturing overhead costs allocated to production.

• A) $140,000
• B) $164,452
• C) $144,800
• D) $159,280

---

Definitions:

Budgeted Sales

The projected amount of sales revenue that a company plans to achieve in a specific period, based on market analysis and company goals.

Ending Inventory

The monetary amount of merchandise on hand for sale when an accounting cycle concludes, established by the initial stock plus purchases less the expenses of goods sold.

Production Budget

An estimate of the total units to be produced in a given period, factoring in expected sales and inventory requirements.

Cash Budget

A financial plan that estimates incoming and outgoing cash flows over a specific period to ensure liquidity and solvency.