Juarez, Inc. designs and manufactures custom cabinets. The company uses a job-or

Question

Juarez, Inc. designs and manufactures custom cabinets. The company uses a job-order costing system, and the allocates overhead at $18 per direct labor hour. Over or underapplied overhead is not material. During May, Juarez’s transactions included the following:    

Direct labor cost incurred at $15 an hour          $5,400

Manufacturing overhead cost incurred               6,800

Direct materials purchased                                11,500

Raw materials inventory, beginning                       160

Raw materials inventory, ending                            280

Sales                                                                 23,000

Selling expenses                                                 2,100

Work in process inventory, beginning                   220

Work in process inventory, ending                        250

How much is over or underapplied overhead for May?

Explanation / Answer

Given Applied Overhead @ 18 Per Direct Labour No of Direct Labour Hours 5400/15 No of Direct Labour Hours = 360 Applied Overhead @ 18 Per Direct Labour =          6,480 Actual Overhead Incurred =          6,800 Under Applied Overhead = 6,480-6,800 Under Applied Overhead = 320

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