Problem 2 – 10 points The following information is available from the Han SoloCo

Question

Problem 2 – 10 points

The following information is available from the Han SoloCompany, which applies manufacturing overhead on the basis ofdirect labor hours.

Estimated manufacturing overhead for theyear             $1,638,000

Estimated direct labor hours for theyear                                   390,000 hours

Actual manufacturing overheadincurred                                   $1,862,000

Actual direct labor hoursworked                                             442,000 hours

Part a

Compute the predetermined overhead rate.

  part b

Compute the amount of applied manufacturing overhead.

Part c

Compute the amount of under-applied or over-appliedmanufacturing overhead. Clearly indicate whether the overheadis under-applied or over-applied.

Explanation / Answer

Part a Predetermined overhead rate 1,638,000    = 4.2 390,000 Part b Applied manufacturing overhead 442,000 x 4.2 =1,856,400 Part c 1,862,000 - 1,856,400 =5,600 underapplied overhead.(applied is less than actual)

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