The following cost data relate to the manufacturing activities of Black Company during the just completed year: Manufacturing overhead costs incurred: Property taxes, factory $ 3,000 Utilities, factory 5,000 Indirect labor 10,000 Depreciation, factory 24,000 Insurance, factory 6,000 Total actual manufacturing overhead costs $ 48,000 Other costs incurred: Purchases of raw materials $ 32,000 Direct labor cost $ 40,000 Inventories: Raw materials, beginning $ 8,000 Raw materials, ending $ 7,000 Work in process, beginning $ 6,000 Work in process, ending $ 7,500 The company uses a predetermined overhead rate to apply overhead cost to jobs. The rate for the year was $5 per machine-hour; a total of 10,000 machine-hours was recorded for the year. All raw materials ultimately become direct materials-none are classified as indirect materials. Required: Compute the amount of underapplied or overapplied overhead cost for the year.

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29 June, 17:41

The following cost data relate to the manufacturing activities of Black Company during the just completed year: Manufacturing overhead costs incurred: Property taxes, factory $ 3,000 Utilities, factory 5,000 Indirect labor 10,000 Depreciation, factory 24,000 Insurance, factory 6,000 Total actual manufacturing overhead costs $ 48,000 Other costs incurred: Purchases of raw materials $ 32,000 Direct labor cost $ 40,000 Inventories: Raw materials, beginning $ 8,000 Raw materials, ending $ 7,000 Work in process, beginning $ 6,000 Work in process, ending $ 7,500 The company uses a predetermined overhead rate to apply overhead cost to jobs. The rate for the year was $5 per machine-hour; a total of 10,000 machine-hours was recorded for the year. All raw materials ultimately become direct materials-none are classified as indirect materials. Required: Compute the amount of underapplied or overapplied overhead cost for the year.

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2,000 overapplied

Explanation:

Giving the following information:

Manufacturing overhead costs incurred:

Property taxes, factory $ 3,000

Utilities, factory 5,000

Indirect labor 10,000

Depreciation, factory 24,000

Insurance, factory 6,000

Total actual manufacturing overhead costs $ 48,000

The rate for the year was $5 per machine-hour; a total of 10,000 machine-hours was recorded for the year.

First, we need to calculate the allocated MOH for the year:

Allocated MOH = Estimated manufacturing overhead rate * Actual amount of allocation base

Allocated MOH = 5*10,000 = $50,000

Under/Over applied = real MOH - allocated MOH = 48,000 - 50,000 = 2,000 overapplied