Answer:
Applied overhead = $380,250
Under applied by = $71,750
Explanation:
Firstly, we know that the formula for overhead rate is ;
Overhead rate = Cost of manufacturing overhead/Cost driver
It also means that to get the predetermined overhead rate, the expected cost will be distributed along a cost driver. Hence;
Labor hours = $396,500/61,000 = $6.5
The above rate would then be applied to the actual labor hour for the period
= $58,500 × $6.5 = $380,250
It therefore means that the applied overhead for the period is $380,250
We will now compare the applied overhead with actual overhead
= $380,250 - $452,000
= ($71,750)
It means that the overhead was under applied as the actual overhead cost was higher.
