Question

Beckner Inc. is a job-order manufacturer. The company uses a predetermined overhead rate based on direct labor hours to apply overhead to individual jobs. For the current year, estimated direct labor hours are 153,000 and estimated factory overhead is $1,208,700. The following information is for September. Job X was completed during September, while Job Y was started but not finished. September 1, inventories: Materials $ 26,000 Work-in-process (All Job X) 55,400 Finished goods 107,600 Materials purchases $ 177,000 Direct materials requisitioned: Job X $ 76,000 Job Y 70,000 Direct labor hours: Job X 9,000 Job Y 7,500 Labor costs incurred: Direct labor ($8.00 per hour) $ 132,000 Indirect labor 56,000 Factory supervisory salaries 13,100 Rental costs: Factory $ 11,300 Administrative offices 5,200 Total equipment depreciation costs: Factory $ 12,400 Administrative offices 4,800 Indirect materials used $ 30,700 The underapplied or overapplied overhead for September is:

Answer 1

Under/over allocation= $6,850 overallocated

Step-by-step explanation:

Giving the following information:

The company uses a predetermined overhead rate based on direct labor hours to apply overhead to individual jobs. For the current year, estimated direct labor hours are 153,000 and estimated factory overhead is $1,208,700.

The following information is for September:

Direct labor hours: Job X 9,000 Job Y 7,500

Labor costs incurred: Direct labor ($8.00 per hour) $ 132,000

Manufacturing overhead costs:

Indirect labor 56,000

Factory supervisory salaries 13,100

Rental costs:

Factory $ 11,300

Total equipment depreciation costs:

Factory $ 12,400

Indirect materials used $ 30,700

Total= 123,500

First, we need to determine the manufacturing overhead rate:

manufacturing overhead rate= total estimated manufacturing overhead/ total amount of allocation base

manufacturing overhead rate= 1208700/ 153000= $7.9 per direct labor hour

Allocated overhead= manufacturing overhead rate* actual allocation base= 7.9* 16500 hours= $130,350

Under/over allocation= real overhead - allocated overhead

Under/over allocation= 123500 - 130350= 6850 overallocated