Question

Sunland Manufacturing produces pumps for residential swimming pools. For the year, management estimated that total manufacturing overhead would be $1641500. Management decided to use direct labor hours to apply manufacturing overhead and budgeted 67000 direct labor hours. The balance in over- or underapplied overhead is deemed to be small. The following information was compiled before an adjustment had been made to close Manufacturing Overhead Control:

Raw Materials Inventory	$304640
Work in Process Inventory	$338030
Finished Goods Inventory	$756380
Actual direct labor hours used	72000
Actual overhead incurred	$1434540

For the year, manufacturing overhead was

Answer 1

Predetermined Manufacturing Overhead Rate

(Total Estimated Manufacturing Overhead Cost)/(Total Estimated hours of the allocation base)

($1,641,500/67,000hrs) = $24.5 per direct labor hr

Total manufacturing overhead allocated based on direct labor hours

(number of actual DLhr * predetermined OH)

(72,000 hrs * $24.5) = $1,764,000

Actual Overhead=$1,434,540

Allocated Overhead=$1,764,000

Over-allocated/applied= $329,460

Hence, for the year manufacturing overhead was overapplied by $329,460.