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The Love Corporation applies overhead to work in process based on direct labor hours. Love estimates...

  1. The Love Corporation applies overhead to work in process based on direct labor hours. Love estimates manufacturing overhead for the following period to be $600,000 and labor hours to total 30,000. If actual manufacturing overhead is $620,000 and actual labor hours total 30,600, manufacturing overhead is:
    1. $8,000 underapplied.
    2. $12,000 overapplied.
    3. $12,156 underapplied.
    4. $20,000 overapplied.

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Answer #1

answer: $8000 underapplied

under or overapplied overhead=budgeted overhead for 30600 hours - actual overhead for 30600 hours

actual overhead for 30600 hours=$620000

budgeted overhead for 30600 hours=predetermined overhead rate*30600 hours

predetermined overhead rate=$600000/30000=$20 per hour

budgeted overhead for 30600 hours=$20*30600=$612000

under or overapplied overhead=$612000-$620000=$8000 underapplied

the budgeted overhead is less than the actual overhead so the overhead is under applied

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