BRIEF EXERCISE 9A–1 Applying Overhead in a Standard Costing System [LO5]

Privack Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below:

Variable overhead cost per direct labor-hour ...................................................... $2.00 Total fixed overhead cost per year ...................................................................... $250,000 Budgeted standard direct labor-hours (denominator level of activity) ................. 40,000 Actual direct labor-hours ...................................................................................... 39,000 Standard direct labor-hours allowed for the actual output ................................... 38,000 Required:

1. Compute the predetermined overhead rate for the year.

2. Determine the amount of overhead that would be applied to the output of the period.