Question

Mallet Music Company makes custom marimbas and xylophones. Since much of the work on these musical instruments is done by hand, the company uses direct labor hours as its manufacturing overhead application base. The company’s annual budgeted overhead costs for 72,500 direct labor hours totaled $580,000.

1. Assume that during the year, the company incurred manufacturing overhead totaling $586,000 for 72,500 direct labor hours. By how much was manufacturing overhead under- or overapplied for the year? (Enter negative amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

2.Assume that during the year, the company incurred manufacturing overhead totaling $586,000 for 73,550 direct labor hours. By how much was manufacturing overhead under- or overapplied for the year? (Enter negative amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

3. Assume that during the year, the company incurred manufacturing overhead totaling $590,000 for 73,550 direct labor hours. By how much was manufacturing overhead under- or overapplied for the year? (Enter negative amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Answer 1

OH rate per DLH:
Budgeted Overheads			580000
Divide: DLH			72500
OH rate per DLH:			8
Case-1
Labour hours			72500
Multiply: DLH			8
OH applied			580000
OH incurred			586000
Under-applied Oh			6000
Case-2
Labour hours			73550
Multiply: DLH			8
OH applied			588400
OH incurred			586000
Over-applied oh			2400
Case-3
Labour hours			73550
Multiply: DLH			8
OH applied			588400
OH incurred			590000
Under-applied OH			1600