The following cost data relate to the manufacturing activities of Black Company

Question

The following cost data relate to the manufacturing activities of Black Company during the just completed year:

The company uses a predetermined overhead rate to apply overhead cost to jobs. The rate for the year was $5 per machine-hour; a total of 10,900 machine-hours was recorded for the year. All raw materials ultimately become direct materials—none are classified as indirect materials.

Compute the amount of underapplied or overapplied overhead cost for the year.

The following cost data relate to the manufacturing activities of Black Company during the just completed year:

Explanation / Answer

Total Over head asapplied per predetrmined rate = 10900*$5= $ 54,500

Total Actual manufactruung Overhead Cost = $ 47,500.

Over applied overehead = $54500-$47500= $ 7000

So if the manufacturing overhead cost applied is more than the actual overhead the diffrence is known as a over applied manufactuirn overhead and of overhead cost applied is less than actual overhead then the diffence known as under applied overhed.

So in this case applied overhead is more than (54,500-47,500)= 7,000 actual overhead so over applied manufactuirng overhead is $ 7,000.

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