Aspen Company estimates its manufacturing overhead to be $848,000 and its direct labor costs to be $530,000 for year 2. Aspen worked on three jobs for the year. Job 2-1, which was sold during year 2, had actual direct labor costs of $166,000. Job 2-2, which was completed, but not sold at the end of the year, had actual direct labor costs of $291,000. Job 2-3, which is still in work-in-process inventory, had actual direct labor costs of $116,000. Actual manufacturing overhead for year 2 was $915,000. Manufacturing overhead is applied on the basis of direct labor costs.
Required:
a. How much overhead was applied to each job in year 2?
b. What was the over- or underapplied manufacturing overhead for year 2?
Estimated manufacturing overhead | 848000 | |
Divide by Estimated Direct labor costs | 530000 | |
Predetermined overhead rate | 160% | |
a | ||
Job 2-1 | 265600 | =166000*160% |
Job 2-2 | 465600 | =291000*160% |
Job 2-3 | 185600 | =116000*160% |
b | ||
Actual direct labor costs | 915000 | |
Less: Overhead applied | 916800 | =265600+465600+185600 |
Overapplied manufacturing overhead | 1800 |
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