Question

Sawyer Manufacturing Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, the Corporation worked 57,000 actual direct labor-hours and incurred $365,000 of actual manufacturing overhead cost. The Corporation had estimated that it would work 52,000 direct labor-hours during the year and incur $300,000 of manufacturing overhead cost. The Corporation's applied manufacturing overhead cost for the year was? Was overhead over applied or under applied? By what amount?

Answer 1

Answer:

Underapplied Manufacturing Overhead $23,000

Explanation:

Sawyer Manufacturing Corporation

Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base

= $300,000 ÷ 52,000 direct labor hours

= 5.7 Approximately $6 per direct labor-hour

Overhead over or underapplied Actual MOH

= 365,000

Applied MOH = $6 x 57000 = $342,000

Underapplied Manufacturing Overhead = 365,000-342,000 = 23,000

Therefore The Corporation's applied manufacturing overhead cost for the year was $23,000