Question

Question 2 Sheridan 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 72,600 direct labor hours totaled $580,800. (a) Assume that during the year, the company incurred manufacturing overhead totaling $580,400 for 72,600 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 (b) Assume that during the year, the company incurred manufacturing overhead totaling $580,400 for 75,350 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 $605,000 for 75,350 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

Estimated Manufacturing overheads = $580,800

Estimated Direct labor hours = 72,600

Predetermined overhead rate = Estimated Manufacturing overheads/Estimated Direct labor hours

= 580,800/72,600

= $8 per Direct labor hour

a)

Applied manufacturing overheads = Actual direct labor hours used x  Predetermined overhead rate

= 72,600 x 8

= $580,800

Actual manufacturing overheads = $580,400

Over applied manufacturing overheads = Applied manufacturing overheads - Actual manufacturing overheads

= $580,800 - $580,400

= $400

b)

Applied manufacturing overheads = Actual direct labor hours used x  Predetermined overhead rate

= 75,350 x 8

= $602,800

Actual manufacturing overheads = $580,400

Over applied manufacturing overheads = Applied manufacturing overheads - Actual manufacturing overheads

= $602,800 - $580,400

= $22,400

c)

Applied manufacturing overheads = Actual direct labor hours used x  Predetermined overhead rate

= 75,350 x 8

= $602,800

Actual manufacturing overheads = $605,000

Under applied manufacturing overheads = Actual manufacturing overheads - Applied manufacturing overheads

= $605,000 - $602,800

= $2,200

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