Durham Company uses a job-order costing system. The following transactions took

Question

Durham Company uses a job-order costing system. The following transactions took place last year: a. Raw materials requisitioned for use in production, $41,000 (75% direct and 25% indirect). b. Factory utility costs incurred, $14,700 c. Depreciation recorded on plant and equipment, $28,200. Three-fourths of the depreciation relates to factory equipment, and the remainder relates to selling and administrative equipment. d. Costs for salaries and wages were incurred as follows: Direct labor Indirect labor Sales commissions Administrative salaries $ 41,000 $ 18,100 $ 10,100 $ 26,000 e. Insurance costs incurred, $3,200 (75% relates to factory operations, and 25% relates to selling and administrative activities). f. Miscellaneous selling and administrative expenses incurred, $18,100. g. Manufacturing overhead was applied to production. The company applies overhead on the basis of 140% of direct labor cost. h. Goods that cost $131,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse. i. Goods that had cost $121,000 to manufacture according to their job cost sheets were sold for $202,000. Required: 1. Determine the underapplied or overapplied overhead for the year. Overhead underapplied

Explanation / Answer

1)Overhead applied =Direct labor cost * % of application

          = 41000* 140%

          = $ 57400

Actual overhead = 66600

overhead underapplied =actual- applied

             = 66600- 57400

             = 9200

2)

Factory overhead selling and administrative cost Raw material 41000*.25= 10250 Factory utility cost 14700 Depreciation 21150     [28200*3/4] 7050    [28200-21150] Indirect labor 18100 sales commission 10100 administrative expense 26000 Insurance 2400    [3200*.75] 800 Miscellaneous selling and administrative 18100 Total 66600 62050

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