Bard Manufacturing uses a job order cost accounting system. During one month Bar

Question

Bard Manufacturing uses a job order cost accounting system. During one month Bard purchased $191,000 of raw materials on credit; issued materials to production of $212,000 of which $13,000 were indirect. Bard incurred a factory payroll of $156,000, paid in cash, of which $23,000 is classified as indirect labor. Bard uses a predetermined overhead application rate of 150% of direct labor cost. If Bard incurred total overhead costs of $194,000 during the month, compute the amount of under- or overapplied overhead:

Explanation / Answer

Direct labor cost = 156,000 - 23,000 = 133,000 Applied overhead = 133,000*1.5 = 199,500 Actual overhead = 194,000 Amount of overapplied overhead = 199,500 - 194,000 = 5,500 answer: overapplied $5,500

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