Mesa Corp. allocates overhead to production on the basis of direct labor costs. Mesa’s total estimated overhead is $450,000 and estimated direct labor is $180,000. Determine the amount of overhead applied to a job which used $20,000 of direct labor.

Allocated MOH= $50,000

Explanation:

Giving the following information:

Mesa’s total estimated overhead is $450,000 and estimated direct labor is $180,000. Determine the amount of overhead applied to a job which used $20,000 of direct labor

First, we need to calculate the predetermined overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 450,000/180,000

Predetermined manufacturing overhead rate= $2.5 per direct labor dollar

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 2.5*20,000

Allocated MOH= $50,000

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