A company uses direct labor-hours in its predetermined overhead rate. At the beg

Question

A company uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the predetermined overhead rate (POHR) was calculated to be $22 per direct labor hour based on an estimated 11,500 direct labor hours for the year.

At the end of the year, actual direct labor-hours for the year were 11,130 hours and the actualmanufacturing overhead costs incurred during the year were $252,480.

Based on this information, compute the amount of underapplied or overapplied manufacturing overhead and also indicate in your answer whether it is underapplied or overapplied.

Explanation / Answer

Applied overhead = 11130*22 = $244860

Actual overhead = $252480

Under applied overhead = Applied overhead-actual overhead

= 244860-252480

Under applied overhead = 7620

So answer is $7620 Under applied overhead

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