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Braam Corporation uses direct labor-hours in its predetermined overhead rate
Braam Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 11,500 hours. At the end of the year, actual direct labor-hours for the year were 9,700 hours, the actual manufacturing overhead for the year was P143,350, and manufacturing overhead for the year was underapplied by P18,220. The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been:
Expert Solution
Computation of the estimated manufacturing overhead at the beginning of the year:-
Manufacturing overhead applied = Actual overhead - Under applied overhead
= 143,350 - 18,220
= 125,130
Predetermined overhead rate = Manufacturing overhead applied / Actual direct labor hours
= 125,130 / 9,700
= 12.90 per hour
Estimated manufacturing overhead = Estimated direct labor-hours * Predetermined overhead rate
= 11,500 * 12.90
= 148,350
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