Question

During 2017, Concord Corporation expected Job no. 59 to cost $300000 of overhead, $540000 of materials, and $200000 in labor. Concord applied overhead based on direct labor cost. Actual production required an overhead cost of $235000, $610000 in materials used, and $260000 in labor. All of the goods were completed. How much is the amount of over- or underapplied overhead

Answer 1

Under/over applied overhead= 155,000 overapplied

Step-by-step explanation:

First, we need to calculate the predetermined overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 300,000/200,000

Predetermined manufacturing overhead rate= $1.5 per direct labor dollar

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 1.5*260,000

Allocated MOH= $390,000

Finally, the over/under application:

Under/over applied overhead= real overhead - allocated overhead

Under/over applied overhead= 235,000 - 390,000

Under/over applied overhead= 155,000 overapplied