Problem:
The Shimano Company allocates manufacturing overhead to production based on direct labor hours. The following information is available for Shimano:
Estimated manufacturing overhead $403,200
Actual manufacturing overhead $378,000
Estimated direct labor hours 21,000
Actual direct labor hours 20,000
a. Compute Shimano's overhead application rate.
b. Assuming that Shimano's overhead application rate is $19, calculate the amount of overhead that should be allocated to production.