Question

Franklin Inc. manufactures pipes and applies manufacturing overhead costs to production at a budgeted indirect−cost rate of $ 18 per direct labor−hour.The following data are obtained from the accounting records for June​ 2018:

Direct materials	$190,000
Direct labor ​(4,100 hours​ @12​/hour)	49,200
Indirect labor	14,000
Plant facility rent	25,000
Depreciation on plant machinery and equipment	23,500
Sales commissions	28,000
Administrative expenses	36,000

For June​ 2018, manufacturing overhead is​ ________.

A.underallocated by $11,300

B.overallocated by $11,300

C.underallocated by $24,700

D.overallocated by $ 24 ,700

Answer 1

Actual manufacturing overheads = Indirect labor + Plant facility rent + Depreciation on plant machinery and equipment

= 14,000 + 25,000 + 23,500

= $62,500

Actual direct labor hours = 4,100

Predetermined overhead rate = $18 per direct labor hour

Manufacturing Overhead applied = Actual direct labor hours x Predetermined overhead rate

= 4,100 x 18

= $73,800

Over applied overhead = Manufacturing Overhead applied - Actual manufacturing overheads

= 73,800 - 62,500

= $11,300

For June​ 2018, manufacturing overhead is​ over allocated by $11,300

Correct option is (B)

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