Question

XYZ Company applies overhead to jobs using direct labor cost as an activity. For the current...

XYZ Company applies overhead to jobs using direct labor cost as an activity. For the current year, XYZ's estimated overhead was $600,000 based on an expected 50,000 direct labor hours to be worked, with direct laborers expected to be paid $6 per hour. For the current year, actual overhead costs totaled $620,000 and actual direct labor cost totaled $325,000. For the year, overhead was:

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Answer #1
Total Labour cost
Labour hours 50000
labour rate per hour 6
Total Labour cost 300000
Pre-determined OH rate:
Total Overheads 600000
Divide: Ttotal Direct labour cost 300000
OH rate as % of DLC 200% of DLC
Overheads applied:
Direct labour cost of the year 325000
Multiply: OH rate as % of DLC 200%
Overheads applied: 650000
Overheads Under/ Over applied:
Overheads incurred 620000
Overheads applied 650000
Over-applied OH 30000
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