question archive Landis Company uses a job order cost system in its manufacturing department

Landis Company uses a job order cost system in its manufacturing department

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Landis Company uses a job order cost system in its manufacturing department. Manufacturing overhead is applied to jobs on the basis of direct labor hours. The following estimates were made for the year: Mfg. Department 
Manufacturing overhead $1,400,000 Direct labor cost 1,200,000 Direct labor hours 100,000 Machine hours 400,000 
During January, the job cost sheets showed the following costs and production data 
Mfg. Department Direct materials used $128,000 Direct labor cost 135,000 Manufacturing overhead incurred 130,000 Direct labor hours 8,400 Machine hours 34,000 
Compute the balance in the Manufacturing Overhead account at the end of January and indicate whether overhead is over- or underapplied. (You must show all work.) 
 

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a)              
  Predetermined Overhead Rate =           
  Estimated Manufacturing Overhead/Direct Labor Cost      
  $1,400,000/$1,200,000            
  116.67% of direct labor cost          
                 
b) Total Manufacturing Cost:          
          Manufacturing Department      
  Direct Materials Used   128,000      
  Direct Labor Cost     135,000      
  Overhead Applied (135000*116.67%) 157500      
  Total Manufacturing Cost   420,500      
                 
                 
                 
c)         Manufacturing Department      
  Actual Manufacturing Overhead   130,000      
  Overhead Applied     157500      
  Underapplied Manufacturing Overhead   27,500      
                 
  When actual manufacturing overhead is less than applied the overhead is under applied
  and vice versa            
         

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