Junior Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $240,600 and 5,600 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $242,600 and actual direct labor-hours were 4,900.
The overhead for the year was: (Round your intermediate calculations to 2 decimal places.)
Given:- Estimated overhead - $240,600; Estimated Direct labour hours - 5,600; Actual overhead - $242,600; Actual Direct labour hours - 4,900;
Required:- Overhead for the year
Computation of overhead rate per labour hour
=Estimated overhead / Estimated Direct Labour Hour
=$42.96 / labour hour (rounded off)
Computation of overhead applied for the year
= Overhead rate per hour x Actual Direct labour hour
= 42.96 x 4900
If Applied overhead < Actual overhead then overhead is underapplied
Underapplied overhead = Actual overhead - Applied overhead
= 242,600 - 210,504
Therefore third option is correct - $32,096 underapplied.
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