Question

AB Co. applies overhead to jobs using a predetermined rate of $1.25 per direct labor hour. For

2008, actual overhead was $25,750; overhead was over applied by $1,500. What estimate of actual

activity in direct labor hours did AB Co. assume when establishing its overhead rate for 2003.

Answer 1

Estimate of actual activity in direct labor hours (DLH) was:

$DLH=\frac{\$25750-\$1500}{\$1.25}=19400$