Question

During its most recent period, Raymond Manufacturing expected Job No. 59 to cost $600,000 of overhead, $1,000,000 of materials, and $400,000 in labor. Raymond applied overhead based on direct labor cost. Actual production required an overhead cost of $590,000, $1,140,000 in materials used, and $440,000 in labor. All of the goods were completed. How much is the amount of over- or underapplied overhead?

Answer 1

Answer:

Under/over applied overhead= $70,000 overapplied

Explanation:

Giving the following information:

Job No. 59:

$600,000 of overhead

$400,000 in labor.

Raymond applied overhead based on direct labor cost.

Actual production required an overhead cost of $590,000, and $440,000 in labor.

First, we need to calculate the predetermined overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 600,000/400,000

Predetermined manufacturing overhead rate= $1.5 per direct labor dollar

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 1.5*440,000

Allocated MOH= $660,000

Finally, the over/under allocation:

Under/over applied overhead= real overhead - allocated overhead

Under/over applied overhead= 590,000 - 660,000

Under/over applied overhead= $70,000 overapplied