Luzadis Company makes furniture using the latest automated technology. The compa

Question

Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The predetermined overhead rate was based on a cost formula that estimates $1,152,000 of total manufacturing overhead for an estimated activity level of 72,000 machine-hours.

During the year, a large quantity of furniture on the market resulted in cutting back production and a buildup of furniture in the company’s warehouse. The company’s cost records revealed the following actual machine hours and manufacturing overhead cost for the year:

Required:

1. Compute the underapplied or overapplied overhead.

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Estimated total manufacturing overhead      1,152,000.00 Estimated machine hours            72,000.00 predetermined overhead rate = 1152,000/72,000                    16.00 Actual Machine hours            55,000.00 Applied overhead = 55000 * 16         880,000.00 Actual Manufacturing overhead cost      1,102,000.00 Underapplied overhead = 880000 - 1102000         222,000.00

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