Larned Corporation recorded the following transactions for the just completed mo

Question

Larned Corporation recorded the following transactions for the just completed month.

a.$71,600 in raw materials were requisitioned for use in production. Of this amount, $61,900 was for direct materials and the remainder was for indirect materials.

b.Total labor wages of $112,800 were incurred. Of this amount, $100,900 was for direct labor and the remainder was for indirect labor.

c.Additional manufacturing overhead costs of $175,200 were incurred.

d.A total of $188,700 in manufacturing overhead was applied to jobs.

Required:
Determine the underapplied or overapplied overhead for the month

Explanation / Answer

So the trick here is to recognize that indirect materials and indirect labors are portions of overhead. So, applied numbers: DM: 61900 DL: 100900 OV: (71600 - 61900) + (112800 - 100900) + 175200 = 196800 So we applied $196,800, but we later find that the overhead is only $188,700. That means we overapplied the overhead by $8,100.

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