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 $179,450. Estimated direct labor cost was $444,000 for 18,500 hours. Actual costs for the most recent month are summarized here: Item Description Total Cost Direct labor (1,850 hours) $ 44,401 Indirect costs Indirect labor 2,470 Indirect materials 3,420 Factory rent 3,350 Factory supervision 4,780 Factory depreciation 5,690 Factory janitorial work 1,290 Factory insurance 1,750 General and administrative salaries 4,280 Selling expenses 5,430 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

Answer:

See answers below

Explanation:

1 The predetermined overhead rate

= Estimated manufacturing overhead / Estimated direct labor hour

= $179,450 / 18,500 hours

= $9.7 per direct labor hour

2. The applied manufacturing overhead

= Actual direct labor hours × predetermined overhead rate per direct labor hour

= 1,850 hours × $9.7

= $17,945

3 Actual manufacturing overhead costs

Indirect labor 2,470 + Indirect materials 3,420 + Factory rent 3,350 + Factory supervision 4,780 + Factory depreciation 5,690 + Factory janitorial work + 1,290 + Factory insurance 1,750

Actual manufacturing overhead costs

= $21,000

4. Over or under applied overhead

= $21,000 - $17,945

= $3,055

Under applied overhead is $3,055