Question

Required information [The following information applies to the questions displayed below.) Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. It started only two jobs during March-Job P and Job Q. Job P was completed and sold by the end of March and Job Q was incomplete at the end of March. The company uses a plantwide predetermined overhead rate based on direct labor-hours. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March): Estimated total fixed manufacturing overhead Estimated variable manufacturing overhead per direct labor-hour Estimated total direct labor-hours to be worked Total actual manufacturing overhead costs incurred $ 15,600 $ 1.80 3,900 $ 22,100 Job Direct materials Direct labor cost Actual direct labor-hours worked Job P $ 15,000 $ 54,000 3,000 $ 9,900 $9,000 500 6. What is the amount of underapplied or overapplied overhead? Total amount

Answer 1

Estimated Variable manufacturing overhead cost per direct labor-hour = $1.80

Estimated total Fixed manufacturing overhead cost = $15,600

Estimated direct labor hours = 3,900

Predetermined overhead rate = Estimated Variable manufacturing overhead cost per direct labor-hour + Estimated total Fixed manufacturing overhead cost/Estimated direct labor hours

= 1.80 + 15,600/3,900

= 1.80 + 4

= $5.80 per direct labor hour

Overhead applied = Actual direct labor hours used x  Predetermined overhead rate

= 3,500 x 5.80

= $20,300

Actual manufacturing overheads = $22,100

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

= 22,100 - 20,300

= $1,800

Total amount = $1,800 underapplied

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