Question

Guinan Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 14,800 hours and the total estimated manufacturing overhead was $327,080. At the end of the year, actual direct labor-hours for the year were 13,900 hours and the actual manufacturing overhead for the year was $302,990. Question: Overhead at the end of the year was overapplied by how much?

Answer 1

$4,200 over applied

Step-by-step explanation:

For computing the over applied overhead, first we have to find out the predetermined overhead rate which is shown below:

Predetermined overhead rate = (Total estimated manufacturing overhead) ÷ (estimated direct labor-hours)

= $327,080 ÷ 14,800 hours

= $22.1

Now we have to find the actual overhead which equal to

= Actual direct labor-hours × predetermined overhead rate

= 13,900 hours × $22.1

= $307,190

So, the overhead over applied would be

= Actual manufacturing overhead - applied overhead

= $302,990 - $307,190

= $4,200 over applied