Question

During 2012, Pavers Manufacturing expected Job No. 59 to cost $300,000 of overhead,$500,000 of materials, and $200,000 in labor. Pavers applied overhead based on directlabor cost. Actual production required an overhead cost of $280,000, $550,000 inmaterials used, and $220,000 in labor. All of the goods were completed. How much isthe amount of over- or underapplied overhead?

Answer 1

The amount of over applied overhead is $50,000

Step-by-step explanation:

The computation is shown below:

First, Calculate the predetermined overhead rate which equals to

= (Overhead cost ÷ labor cost) × 100

= ($300,000 ÷ $200,000) × 100

= 150%

So, the applied overhead equals to

= 150% × actual labor cost

= 150% × $220,000

= $330,000

So, the over/under applied overhead equals to

= Applied overhead - actual overhead

= $330,000 - $280,000

= $50,000 over applied