Question

The following cost data relate to the manufacturing activities of Chang Company during the just-completed year:

Manufacturing overhead costs incurred: Indirect materials: $15,900
Indirect labor: 139,000
Property taxes, factory: 8,900
Utilities, factory: 79,000
Depreciation, factory: 150,300
Insurance, factory: 10,900
Total actual manufacturing overhead costs incurred: $404,000
Other costs incurred:
Purchases of raw materials (both direct and indirect): $409,000 Direct labor cost: $69,000
Inventories: Raw materials, beginning: $20,900
Raw materials, ending: $30,900
Work in process, beginning: $40,900
Work in process, ending: $70,900
The company uses a predetermined overhead rate to apply overhead cost to jobs. The rate for the year was $20 per machine-hour. A total of 20,600 machine-hours was recorded for the year. Compute the amount of under-applied or over-applied overhead cost for the year.

Answer 1

Over-applied overhead cost $8,000

Step-by-step explanation:

Computation of the amount of under-applied or over-applied overhead cost for the year

First step is to calculate the Manufacturing overhead cost applied to work in process

Manufacturing overhead cost applied to work in process= $20*20,600

Manufacturing overhead cost applied to work in process = $412,000

Now let calculate the amount of under-applied or over-applied overhead cost for the year using this formula

Over-applied overhead cost for the year=Manufacturing overhead cost applied to work in process -Actual manufacturing overhead cost incurred

Let plug in the formula

Over-applied overhead cost for the year=$412,000-$404,000

Over-applied overhead cost for the year=$8,000

Therefore the amount of over-applied overhead cost for the year will be $8,000