Question

Billy Boi Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $88,480 and 2,800 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $80,160 and actual direct labor-hours were 2,700.
The overhead for the year was _____. (Round your intermediate calculations to 2 decimal places.) Please show the calculations.

Answer 1

Answer:

The correct answer is $5,160.

Explanation:

According to the scenario, the given data are as follows:

Estimated OH = $88,480

Estimated direct labor hour = 2,800 labor hour

So, Estimated OH per labor hour = $88,480 ÷ 2,800 = $31.6 / labor hour

Actual OH = $80,160

Actual Direct labor hour = 2,700 labor hour

Now,  Applied OH = Estimated OH per labor hour × Actual Direct labor hour

= $31.6 × 2700

= $85,320

Since, Applied OH is Greater than Actual OH, it is underapplied OH.

Underapplied OH = Applied OH - Actual OH

= $85,320 - $80,160

= $5,160.

Hence, the underapplied OH for the year was $5,160.