Use the Budget Data Shown Below for Sharp Company to Answer

question 102

Multiple Choice

Use the budget data shown below for Sharp Company to answer the questions that follow:
$$\begin{array} { l r } \text { Estimated direct labor hours } & 12,000 \\\text { Estimated direct labor dollars } & \$ 90,000 \\\text { Estimated factory overhead costs } & \$ 179,000 \\\text { Actual direct labor hours } & 11,500 \\\text { Actual direct labor dollars } & \$ 92,000 \\\text { Actual factory overhead costs } & \$ 180,000\end{array}$$
-A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that factory overhead costs would be $360,000 and direct labor hours would be 30,000. Actual manufacturing overhead costs incurred were $377,200, and actual direct labor hours were 36,000. What is the predetermined overhead rate per direct labor hour?

• A) $12.00
• B) $10.00
• C) $12.57
• D) $10.48

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Definitions:

Adjusting Entries

Journal entries made at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.

Estimated Amount

A projection or approximation of a financial figure often used in budgeting or forecasting.

Allowance Method

A method used in accounting to estimate and account for bad debts, representing the amount of accounts receivable that may not be collected.

Allowance for Doubtful Accounts

A contra asset account that represents the estimated portion of accounts receivable that may not be collectible.