Question

PA10.

LO 4.6The actual overhead for a company is $74,539. Overhead was based on 6,000 direct labor hours and was $2,539 underapplied for the year.

What is the overhead application rate per direct labor hour?
What is the journal entry to dispose of the underapplied overhead?

Answer 1

$12.42 per direct labor hour

Step-by-step explanation:

Overhead application rate per direct labor hour:

= Actual overhead ÷ Direct labor hours

= $74,539 ÷ 6,000

= $12.42 per direct labor hour

The Journal entry to dispose of the underapplied overhead is as follows:

Cost of goods sold A/c Dr. $2,539

To Manufacturing Overhead $2,539

(Being underapplied overhead is recorded)