Question

Kirkaid Company recorded the following transactions for the just completed month:

a. $94,000 in raw materials were requisitioned for use in production. Of this amount, $77,000 was for direct materials and the remainder was for indirect materials.

b. Total labor wages of $118,000 were incurred. Of this amount, $110,000 was for direct labor and the remainder was for indirect labor.

c. Additional actual manufacturing overhead costs of $202,000 were incurred.

d. A total of $232,000 in manufacturing overhead was applied to jobs.

Required:

Determine the underapplied or overapplied overhead for the month.

Answer 1

Ans.	*Calculations for actual manufacturing overhead :
	Particulars	Amount
	Indirect materials ($94,000 - $77,000)	$17,000
	Indirect labor ($118,000 - $110,000)	$8,000
	Additional manufacturing overhead	$202,000
	Total actual manufacturing overhead cost	$227,000
	*Indirect manufacturing costs are known as overheads.
	*Calculations for over or under applied overhead cost :
	Over applied overhead = Applied overhead - Actual overhead
	$232,000 - $227,000
	$5,000
	If the applied overhead is greater than the Actual overhead
	it means that the overhead is over applied.