Question

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.

Answer 1

2,000 overapplied

Step-by-step 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