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Trust Company applies overhead based on direct labor hours. At the beginning of the year, Trust estimates overhead to be $700,000, machine hours to be 200,000, and direct labor hours to be 35,000. During February, Trust has 5,000 direct labor hours and 10,000 machine hours. What is the amount of overhead applied for February? (A) $22,000 (B) $124,000 (C) $100,000 (D) $69,500 (E) $185,200

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Answer:

The correct answer is C: $100,000

Explanation:

Giving the following information:

Trust Company applies overhead based on direct labor hours. At the beginning of the year, Trust estimates overhead to be $700,000, and direct labor hours to be 35,000. During February, Trust has 5,000 direct labor hours.

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base= 700000/35000= $20 per direct labor hour

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base= 20*5000= $100,000

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