Problem:
At the beginning of the year, manufacturing overhead for the year was estimated to be $363,200. At the end of the year, actual direct labor-hours for the year were 22,800 hours, the actual manufacturing overhead for the year was $351,000, and manufacturing overhead for the year was overapplied by $13,800.
Required:
Question: If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been:
- 22,700 direct labor-hours
- 22,800 direct labor-hours
- 21,075 direct labor-hours
- 21,938 direct labor-hours
Note: Explain all steps comprehensively.