Determining the under-and overapplied overhead Dirk Corp. has four departmental account...

Determining the under-and overapplied overhead

Dirk Corp. has four departmental accounts: Building Maintenance, General Factory Overhead, Machining, and Assembly. The direct labor hour method is used to apply factory overhead to the jobs being worked on in Machining and Assembly. The company expects each production department to use 30,000 direct labor hours during the year. The estimated overhead rates for the year include the following:

During the year, both Machining and Assembly used 28,000 direct labor hours. Factory overhead costs incurred during the year follow:

Building maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $30,000

General factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,400

Machining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,800

Assembly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,800

In determining application rates at the beginning of the year, cost allocations were made as follows, using the sequential distribution method:

Building Maintenance to: General Factory Overhead, 10%; Machining, 50%; Assembly, 40%.

General factory overhead was distributed according to direct labor hours.

Required:

Determine the under- or overapplied overhead for each production department. (Hint: First you must distribute the service department costs.)