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Baka Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the...

Baka Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $243,300 and 8,300 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $244,400 and actual direct labor-hours were 5,800.

The overhead for the year was:

(Round your intermediate calculations to 2 decimal places.)

  • A. $74,402 overapplied

  • B. $74,402 underapplied

  • C. $73,302 overapplied

  • D. $73,302 underapplied

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Answer #1

Predetermined overhead rate

= Total estimated overhead / Estimated direct labor-hours

= $243,300 / 8,300

= $29.31 per direct labor hour

Overhead applied = Predetermined overhead rate x Actual direct labor-hours = $29.31 x 5,800 = $169,998

Actual manufacturing overhead = $244,400

The actual manufacturing overhead for the year is greater than the amount of manufacturing overhead applied.

Therefore, manufacturing overhead is underapplied by $74,402 ($244,400 - $169,998).

The correct answer is B.

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