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 $171,990. Estimated direct labor cost was $455,490 for 18,900 hours.

Actual costs for the most recent month are summarized here:

Item Description	Total Cost
Direct labor (1,890 hours)	$	45,550
Indirect costs
Indirect labor		2,550
Indirect materials		3,360
Factory rent		3,390
Factory supervision		4,850
Factory depreciation		5,760
Factory janitorial work		1,200
Factory insurance		1,810
General and administrative salaries		4,270
Selling expenses		5,370

Required:
1. Calculate the predetermined overhead rate.

2. Calculate the amount of applied manufacturing overhead.

3. Calculate actual manufacturing overhead costs.

4. Compute over- or underapplied overhead.

Answer 1

Answers

• [1]

A	Estimated manufacturing overhead cost	$171,990
B	Estimated DLHs	18,900
C = A/B	Predetermined Overhead rate	$9.10	per DLH = Answer

• [2]

A	Actual DLHS	1,890
B	Predetermined Overhead rate	$9.10
C = A x B	Amount of Applied manufacturing overhead	$17,199	Answer

• [3]

Indirect labor	$2,550
Indirect materials	$3,360
Factory rent	$3,390
Factory supervision	$4,850
Factory depreciation	$5,760
Factory janitorial work	$1,200
Factory insurance	$1,810
Actual manufacturing overhead cost	$22,920	Answer

• [4]

Actual manufacturing overhead cost	$22,920
Amount of Applied manufacturing overhead	$17,199
Overheads are	UNDER-APPLIED
Under-Applied	$5,721