question archive A manufacturing company applies factory overhead based on direct labor hours
A manufacturing company applies factory overhead based on direct labor hours
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A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that factory overhead costs would be $360,000 and direct labor hours would be 30,000. Actual factory overhead costs incurred were $377,200, and actual direct labor hours were 36,000. What is the amount of overapplied or underapplied manufacturing overhead at the end of the year?
$6,000 underapplied
$54,800 underapplied
$6,000 overapplied
$54,800 overapplied
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Answer : $54,800 overapplied
Explanation :
Predetermine overhead rate = Estimated that factory overhead costs / Estimated direct labor hrs.
= $360,000 / 30,000 hrs .
= $12 per hr.
Overhead applied = Actual direct labor hrs * Predetermine overhead rate
= 36 000 hrs * $12 per hr. = $432,000.
Actual factory overhead costs = $377,200.
Amount of overapplied manufacturing overhead = Overhead applied - Actual factory overhead costs .= $432,000 - $377,200 = $54,800 overapplied.
