Question

Osborn Manufacturing uses a predetermined overhead rate of $18.90 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $240,030 of total manufacturing overhead for an estimated activity level of 12,700 direct labor-hours.The company incurred actual total manufacturing overhead costs of $237,000 and 12,200 total direct labor-hours during the period.
Determine the amount of underapplied manufacturing overhead for the period.

Answer 1

Answer:

$6,420 under applied

Explanation:

The computation of the amount of under-applied manufacturing overhead for the period is shown below:

= Actual manufacturing overhead - applied overhead

where,

Actual manufacturing overhead = $237,000

And, the applied overhead is

= 12,200 direct labor hours × $18.90

= $230,580

So, the amount is

= $237,000 - $120,580

= $6,420 under applied