Question

During 2019, Waterway Industries expected Job no. 59 to cost $300000 of overhead, $450000 of materials, and $200000 in labor. Waterway applied overhead based on direct labor cost. Actual production required an overhead cost of $245000, $520000 in materials used, and $170000 in labor. All of the goods were completed. How much is the amount of over- or underapplied overhead

Answer 1

the overhead overapplied is $137,500

Step-by-step explanation:

The computation of the overhead underapplied or overapplied is shown below:

Predetermined overhead rate is

= Expected overhead ÷ direct labour cost

= $450,000 ÷ $200,000

= 225% of direct labour cost

Now the applied overhead is

= $170,000 × 225%

= $382,500

And, the actual overhead is $245,000

So, the overhead pverapplied is

= $382,500 - $245,000

= $137,500

Hence, the overhead overapplied is $137,500