Question

Verizox Company uses a job order cost system with manufacturing overhead applied to products based on direct labor hours. At the beginning of the most recent year, the company estimated its manufacturing overhead cost at $197,000. Estimated direct labor cost was $486,590 for 19,700 hours.

Actual costs for the most recent month are summarized here:   

Item Description	Total Cost
Direct labor (1,970 hours)	$	48,660
Indirect costs
Indirect labor		2,410
Indirect materials		3,320
Factory rent		3,340
Factory supervision		4,780
Factory depreciation		5,800
Factory janitorial work		1,290
Factory insurance		1,780
General and administrative salaries		4,240
Selling expenses		5,370

Required:
1. Calculate the predetermined overhead rate. (Round your answer to 2 decimal places.)



2. Calculate the amount of applied manufacturing overhead.



3. Calculate actual manufacturing overhead costs.



4. Compute over- or underapplied overhead. (Input the amount as positive value.)

Answer 1

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Answer 1)	Calculate the predetermined overhead rate
	Overhead rate = Estimated overhead cost / Number of hr
		=197000/19700
		10	per hr
Answer 2)	Calculate the amount of applied manufacturing overhead
	Applied overhead = Overhead rate * Hr worked
			=10*1970
			19700
Answer 3)	Calculate actual manufacturing overhead costs.
	Indirect labor	2,410
	Indirect materials	3,320
	Factory rent	3,340
	Factory supervision	4,780
	Factory depreciation	5,800
	Factory janitorial work	1,290
	Factory insurance	1,780
	Actual manufacturing overhead	22,720
Answer 4)	Compute over- or under applied overhead
	Applied over head	19700
	Actual overhead	22,720
	Therefore under applied overhead =	3,020