Answer:
Explanation:
The computation of the predetermined overhead rate is shown below:
Predetermined overhead rate = (Total estimated manufacturing overhead) ÷ (estimated direct labor-hours)
= $997,500 ÷ 70,000 hours
= $14.25
For computing the over applied or under applied overhead, first , we have to compute the actual manufacturing overhead which is shown below:
= Depreciation + Property taxes + Indirect labor + Supervisory salaries + Utilities + Insurance + Rental of space + indirect material
= $233,000 + $21,000 + $80,000 + $200,000 + $58,000 + $32,000 + $301,000 + $77,000
= $1,002,000
Now we have to find the actual overhead which equal to
= Actual direct labor-hours × predetermined overhead rate
= 80,000 hours × $14.25
= $1,140,000
So, the overhead equals to
= Actual manufacturing overhead - actual overhead
= $1,002,000 - $1,140,000
= $138,000 over-applied
