Manufacturing overhead—over/underapplied Creative Lighting, Inc., makes specialty table lamps. Manufacturing overhead is applied to production on a direct labor hours basis. During June, the first month of the company’s fiscal year, $56,520 of manufacturing overhead was applied to Work in Process Inventory using the predetermined overhead application rate of $6 per direct labor hour.
Required:
a. Calculate the number of hours of direct labor used during June.
b. Actual manufacturing overhead costs incurred during June totaled $49,340. Calculate the amount of over- or underapplied overhead for June.
c. Identify two possible explanations for the over- or underapplied overhead.
d. Explain the accounting appropriate for the over- or underapplied overhead at the end of June.
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