Question

Minstrel Manufacturing uses a job order costing system. During one month, Minstrel purchased $195,000 of raw materials on credit; issued materials to production of $208,000 of which $17,000 were indirect. Minstrel incurred a factory payroll of $152,000, of which $27,000 was indirect labor. Minstrel uses a predetermined overhead application rate of 150% of direct labor cost. If Minstrel incurred total overhead costs of $185,000 during the month, compute the amount of under- or overapplied overhead: Multiple Choice $2,500 underapplied. $2,500 overapplied. $43,000 overapplied. $33,000 overapplied. $33,000 underapplied.

Answer 1

Under/over applied overhead= $2,500 overallocated

Step-by-step explanation:

Giving the following information:

Direct labor= 152,000 - 27,000= $125,000

Minstrel uses a predetermined overhead application rate

of 150% of direct labor cost.

Minstrel incurred total overhead costs of $185,000 during the month.

First, we need to allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 1.5*125,000= $187,500

Now, we can determine the over/under allocation:

Under/over applied overhead= real overhead - allocated overhead

Under/over applied overhead= 185,000 - 187,500

Under/over applied overhead= $2,500 overallocated