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Overhead Calculation

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.

Solution Preview

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.

The overhead application rate is the rate that would be used to apply the overhead to the products. Direct Material and Direct ...

Solution Summary

The solution explains how to calculate the overhead application rate and the amount of overhead applied

$2.19