Question

Adams Manufacturing allocates overhead to production on the basis of direct labor costs. At the beginning of the year, Adams estimated total overhead of $401,400; materials of $413,000 and direct labor of $223,000. During the year Adams incurred $424,000 in materials costs, $418,900 in overhead costs and $227,000 in direct labor costs. Compute the amount of under- or overapplied overhead for the year.

Answer 1

Answer:

an under applied of $10,300

Explanation:

The computation of the over applied or under applied is shown below;

Difference in overhead = Actual overhead - applied overhead

= $418,900 - ($227,000 × ($401,400 ÷ $223,000))

= $418,900 - $408,600

= $10,300

Since actual overhead is more than the applied overhead so it is an under applied of $10,300