Question

Crich Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 21,840 hours and the total estimated manufacturing overhead was $506,688. At the end of the year, actual direct labor-hours for the year were 21,600 hours and the actual manufacturing overhead for the year was $506,688. Overhead at the end of the year was: (Round your intermediate calculations to 2 decimal places.)

Answer 1

Overhead at the end of the year was $5,568 under applied.

Step-by-step explanation:

For computing the overhead for the end of the year, first, we have to compute the predetermined overhead rate which equals to

= (Total estimated manufacturing overhead) ÷ (estimated direct labor-hours)

= $506,688 ÷ 21,840 hours

= $23.2

Now we have to find out the actual overhead which equals to

= Actual direct labor-hours × predetermined overhead rate

= 21,600 hours × $23.2

= $501,120

So, the ending overhead = Actual manufacturing overhead - Actual overhead

= $506,688 - $501,120

= $5,568

This amount reflects that the overhead is under applied