Question

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.)

Multiple Choice

• $32,096 overapplied

• $30,096 overapplied

• $32,096 underapplied

• $30,096 underapplied

Answer 1

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

=240,600/5,600

=$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

= $210,504

If Applied overhead < Actual overhead then overhead is underapplied

Underapplied overhead = Actual overhead - Applied overhead

= 242,600 - 210,504

= $32,096

Therefore third option is correct - $32,096 underapplied.