Question

Required information [The following information applies to the questions displayed below.] Stellar Sound, Inc. which uses a job-order costing system, had two jobs in process at the start of 20x1: job no. 64 ($84,100) and job no. 65 ($53,500). The following information is available: a. The company applies manufacturing overhead on the basis of machine hours (based on practical capacity). Budgeted overhead and machine activity for the year were anticipated to be $792,000, and 16,000 hours, respectively. b. The company worked on four jobs during the first quarter. Direct materials used, direct labor incurred, and machine hours consumed were as follows: Direct Material $21,000 Job No. 64 65 66 67 Direct Labor $35,000 22,000 65,000 8,800 Machine Hours 1,200 700 2,000 500 44,000 15,000 c. Manufacturing overhead during the first quarter included charges for depreciation ($33,000), indirect labor ($60,200), indirect materials used ($5,000), and other factory costs ($139,600). d. Stellar Sound completed job no. 64 and job no. 65. Job no. 65 was sold on account, producing a profit of $34,800 for the firm.

Answer 1

Overhead rate = 792000/16000 = 49.50 per MH

Applied overhead = (1200+700+2000+500)*49.50 = 217800

Manufacturing overhead = 33000+60200+5000+139600 = 237800

The overhead was under applied for the first quarter of the year by (237800-217800) = $20000