Question

Perion Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 11,500 hours and the total estimated manufacturing overhead was $275,425. At the end of the year, actual direct labor-hours for the year were 11,100 hours and the actual manufacturing overhead for the year was $270,425. Overhead at the end of the year was:

Answer 1

Answer: $4580 Underapplied

Explanation:

To solve this, we have to calculate the predetermined overhead rate first and this will be:

= Estimated total manufacturing overhead / Estimated total amount of the allocation base

= $275,425 / 11500

= 23.95

Since the actual direct labor-hours for the year were 11,100 hours, the applied overhead will be:

= 11100 × 23.95

= $265845

Since actual manufacturing overhead for the year was $270,425, and the applied overhead was $265845, there's an Underapplied overhead of ($270,425 - $265845) = $4580