Question

Crich Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 22,060 hours and the total estimated manufacturing overhead was $560,324. At the end of the year, actual direct labor-hours for the year were 22,000 hours and the actual manufacturing overhead for the year was $560,324. Overhead at the end of the year was: (Round your intermediate calculations to 2 decimal places.)

Answer 1

$1,524 underapplied

Step-by-step explanation:

Crich coporation uses a direct labor hour in its predetermined overhead rate

The first step is to calculate the predetermined overhead rate

= Estimated overhead/estimated labor hours

= 560,324/22,060

= 25.4 per hour

The overhead applied can be calculated as follows

= predetermined overhead rate × actual direct labor hours

= 25.4 × 22,000

= $558,800

Since the actual overhead is $560,324 then the overhead at the end of the year can be calculated as follows

= $558,800-$560,324

= $1,524 underapplied

Hence the overhead at the end of the year was $1,524 underapplied