Question

Trifiletti Company estimates that its annual manufacturing overhead costs will be $600,000 for 2007. The actual overhead costs at the end of 2007 are $605,000. Activity base information for 2007 follows:

Activity Base Estimated Actual

Direct Labor Cost $1,200,000 $1,218,000

Direct Labor Hours 120,000 116,000

Machine Hours 60,000 58,000

Instructions

A Compute the predetermined overhead rate for each activity base.

B. Compute the amount of overhead applied in 2007 for each activity base.

C. What is the purpose of applying overhead?