Crich Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 22,120 hours and the total estimated manufacturing overhead was $575,120. At the end of the year, actual direct labor-hours for the year were 22,100 hours and the actual manufacturing overhead for the year was $575,120. Overhead at the end of the year was: (Round your intermediate calculations to 2 decimal places.)
The overhead at the end of the year was underapplied by $520.
As per the data provided:
We need to first determine the applied overhead based on the predetermined overhead rate.
*Predetermined overhead rate = Estimated manufacturing overhead / Estimated allocation base (Direct labor hours)
*Predetermined overhead rate = $575,120 / 22,120 hours
*Predetermined overhead rate = $26 per labor hour.
Now, the applied overhead will be:
*Applied overhead = Predetermined overhead rate * Actual labor hours used
*Applied overhead = $26 * 22,100 hours
*Applied overhead = $574,600
The last step is to determine the under or overapplied overhead:
Since the actual overhead incurred is more than the applied overhead, the overhead is said to be underapplied. Therefore, the overhead at the end of the year was underapplied by $520.
*Underapplied overhead = Actual overhead - Applied overhead
*Underapplied overhead = $575,120 - $574,600
*Underapplied overhead = $520
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