Question

Chapter 3 Homework Saved 9 Part 9 of 15 Required information The Foundational 15 (L03-1, LO3-2, L03-3, LO3-4) [The following information applies to the questions displayed below) Bunnell Corporation is a manufacturer that uses job-order costing. On January 1, the company's inventory balances were as follows: 0.66 points Raw materials Work in process Finished goods eBook $ 60,500 $ 20,800 $ 57,600 Print The company applies overhead cost to jobs on the basis of direct labor hours. For the current year, the company's predetermined overhead rate of $11.25 per direct labor-hour was based on a cost formula that estimated $450,000 of total manufacturing overhead for an estimated activity level of 40,000 direct labor-hours. The following transactions were recorded for the year: References a. Raw materials were purchased on account $622,000. b. Raw materials use in production, $591800. All of of the raw materials were used as direct materials. c. The following costs were accrued for employee services: direct labor, $400,00p, Indirect labor, $150,000; selling and administrative salaries, $280,000 d. Incurred various selling and administrative expenses de 9. advertising, sales travel costs, and finished goods warehousingl. $400,000 e. Incurred various manufacturing overhead costs (eg, depreciation, insurance, and tires). $300,000 1. Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all jobs during the year 9 Jobs costing $1.360.750 to manufacture according to their job cost sheets were completed during the year Jobs were sold on account to customers during the year for a total of $3,330,000. The jobs cost $1,370,750 to manufacture according to their job cost sheets Foundational 3-9 9. is manufacturing overhead underapplied or overapplied for the year? By how much? Overapplied overhead

Answer 1

Before doing this question we should have knowledge of overhead.

Overheads:- Apart from Prime Cost, Overheads are expenses of organisation which can be of manufacturing activity, administrative activity, and selling and distribution activity.

Overhead belongs to manufacturing activity are called as manufacturing overhead, likewise administrative overhead and selling and distribution overhead pertains to administrative activity, and selling and distribution activity respectively.

Overheads are charged by some basis like percentage of direct labour,percentage of direct material, no. of hours worked etc.

Actual vs. Applied overhead:- Actual overhead are those overhead that are actually incurred and shown in profit and loss account.

Applied overheads are those overheads which are charged in cost accounting at the time of calculating cost of the products and these are calculated on some basis.

Overapplied vs. Underapplied overhead:- If Actual overhead is more than Applied overhead than it is calledd underapplied overhead.

Alternatively if Applied overhead is more than Actual overhead than it is calledd overapplied overhead.

Now coming to your question....

Calculation of underapplied or overapplied manufacturing overhead

Actual overhead = 300000 (given in question)

Applied overhead = 41000 direct labour hours $\chi$ 11.25 per direct labour hour = 461250

Overapplied overhead = 161250