Question

Filex Company manufactures pipes and applies manufacturing overhead costs to production at a budgeted indirectminuscost rate of​ $18 per direct laborminushour. The following data are obtained from the accounting records for June​ 2014: Direct materials ​$140,000 Direct labor​ (4,000 hours​ @ $10/hour) ​40,000 Indirect labor ​13,000 Plant facility rent ​30,000 Depreciation on plant machinery and equipment ​22,500 Sales commissions ​24,000 Administrative expenses ​28,000 For June​ 2014, manufacturing overhead is​ ________. A. overallocated by​ $6,500 B. underallocated by​ $6,500 C. underallocated by​ $21,500 D. overallocated by​ $21,500

Answer 1

A. overallocated by​ $6,500

Step-by-step explanation:

Indirect labor ​13,000

Plant facility rent ​30,000

Depreciation on plant machinery and equipment ​22,500

Total overhead: 65,500

applied overhead: $18 x 4000 hours = 72,000

we now compare both, the applied and actual:

72,000 > 65,500

As the applied is greater we overapplied we capitalized cost that didn't occur we must decrease the overhead.

72,000 - 65,500 = 6,500 overallocated