Question

At the beginning of the year, Horvath Company estimated the following: Overhead $270,000 Direct labor hours 90,000 Horvath uses normal costing and applies overhead on the basis of direct labor hours. For the month of January, direct labor hours were 8,350. By the end of the year, Horvath showed the following actual amounts: Overhead $276,000 Direct labor hours 89,600 Assume that unadjusted Cost of Goods Sold for Horvath was $396,000. Required: 1. Calculate the predetermined overhead rate for Horvath. Round your answers to the nearest cent, if rounding is required. $ per direct labor hour 2. Calculate the overhead applied to production in January. (Note: Round to the nearest dollar, if rounding is required.) $ 3. Calculate the total applied overhead for the year. $ Was overhead over- or underapplied

Answer 1

Answer:

overhead rate: $3 per labor hours

Appled overhead for January 25,050 dollars

Applied overhead: 268,800 dollar underapplied by 7,200 dollars

Explanation:

$\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate$

expected overhead: 270,000

cost driver: labor hours.

expected labor hours: 90,000

overhead rate: 270,000 / 90,000 = 3

Applied overhead for January

8,350 labor hours x $3 overhead rate = 25,050

for the year:

89,600 x $ 3 =    268,800

actual overhead 276,000

Difference:             7,200

As the actual cost were higher; the overhead was underapplicated.

we need to capitalize more cost.