Question

The OHApp-717 Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, the company worked 59,500 actual direct labor-hours and incurred $492,000 of actual manufacturing overhead cost. The company had estimated that it would work 61,400 direct labor-hours during the year and incur $423,660 of manufacturing overhead cost. The company's manufacturing overhead cost for the year was: (Round your intermediate calculations to 2 decimal places.)

Answer 1

$81,450

Step-by-step explanation:

The computation of the company's manufacturing overhead cost for the year was given below:

Predetermined overhead rate is

= ($423,660) ÷ 61,400 direct labor hours

= $6.90

And,

Actual overhead cost = $492,000

Now

Applied overhead cost is

= 59,500 × $6.90

= $410,550

So, the overhead underapplied by

= $492,000 - $410,550

= $81,450