Question

Bramble Music Company makes custom marimbas and xylophones. Since much of the work on these musical instruments is done by hand, the company uses direct labor hours as its manufacturing overhead application base. The company's annual budgeted overhead costs for 73,400 direct labor hours totaled $587,200. (a) Assume that during the year, the company incurred manufacturing overhead totaling $583,000 for 73,400 direct labor hours. By how much was manufacturing overhead under-or overapplied for the year? (Enter negative amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Overhead $ 587200 (b) Assume that during the year, the company incurred manufacturing overhead totaling $583,000 for 74,450 direct labor hours. By how much was manufacturing overhead under-or overapplied for the year? (Enter negative amount using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45).) Overhead $ (c) Assume that during the year, the company incurred manufacturing overhead totaling $598,000 for 74,450 direct labor hours. By how much was manufacturing overhead under-or overapplied for the year? (Enter negative amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Overhead $

Answer 1

Predetermined overhead rate= Estimated total budgeted costs/Estimated direct labor hours

= $587200/73400= $8 per direct labor hour

(a) Applied manufacturing overhead= Actual labor hours*Predetermined overhead rate

= 73400*$8= $587200

Underapplied or overapplied overhead= Applied manufacturing overhead-Actual manufacturing overhead

= $587200-583000= $4200 overapplied

Overapplied

overhead

$4200

(b) Applied manufacturing overhead= Actual labor hours*Predetermined overhead rate

= 74450*$8= $595600

Underapplied or overapplied overhead= Applied manufacturing overhead-Actual manufacturing overhead

= $595600-583000= $12600 overapplied

Overapplied

overhead

$12600

(c) Applied manufacturing overhead= Actual labor hours*Predetermined overhead rate

= 74450*$8= $595600

Underapplied or overapplied overhead= Applied manufacturing overhead-Actual manufacturing overhead

= $595600-598000= $-2400 underapplied

Underapplied

overhead

$-2400