During 2012, Pavers Manufacturing expected Job No. 59 to cost $300,000 of overhead,$500,000 of materials, and $200,000 in labor. Pavers applied overhead based on directlabor cost. Actual production required an overhead cost of $280,000, $550,000 inmaterials used, and $220,000 in labor. All of the goods were completed. How much isthe amount of over - or underapplied overhead?

Question

Stanley Reese

Business

2 December, 21:41

During 2012, Pavers Manufacturing expected Job No. 59 to cost $300,000 of overhead,$500,000 of materials, and $200,000 in labor. Pavers applied overhead based on directlabor cost. Actual production required an overhead cost of $280,000, $550,000 inmaterials used, and $220,000 in labor. All of the goods were completed. How much isthe amount of over - or underapplied overhead?

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Answers (1)

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Maren Peterson · Answer 1

The amount of over applied overhead is $50,000

Explanation:

The computation is shown below:

First, Calculate the predetermined overhead rate which equals to

= (Overhead cost : labor cost) * 100

= ($300,000 : $200,000) * 100

= 150%

So, the applied overhead equals to

= 150% * actual labor cost

= 150% * $220,000

= $330,000

So, the over/under applied overhead equals to

= Applied overhead - actual overhead

= $330,000 - $280,000

= $50,000 over applied