Question

Kirkaid Company recorded the following transactions for the just completed month: a. $84,000 in raw materials were requisitioned for use in production. Of this amount, $72,000 was for direct materials and the remainder was for indirect materials. b. Total labor wages of $108,000 were incurred. Of this amount, $105,000 was for direct labor and the remainder was for indirect labor. c. Additional actual manufacturing overhead costs of $197,000 were incurred. d. A total of $218,000 in manufacturing overhead was applied to jobs.

Answer 1

$6,000 underapplied

Explanation:

The computation of the amount overapplied or under applied is shown below:-

Amount applied = Applied manufacturing overhead - (Indirect materials + Indirect labor + other OH costs incurred )

= $218,000 - {($84,000 - $72,000) + ($108,000 - $105,000) + $197,000 }

= $218,000 $12,000 + $3,000 + $197,000

= $218,000 - $212,000

= $6,000

Therefore for computing the amount under applied we simply applied the above formula.