lies overhead to jobs on the basis of direct professional labor hours. Overhead
ID: 2584700 • Letter: L
Question
lies overhead to jobs on the basis of direct professional labor hours. Overhead was estimated to be $150,000, direct professional labor hours were estimated to be 15,000, and direct professional labor cost was projected to be S225,000. During the year, Media incurred actual overhead costs of s148.000, actual direct professional labor hours of 14,900, and actual direct labor cost of $222,000. By year-end, the firm's overhead was: A. S4,000 underapplied B. S5,000 underapplied C. S1,000 underapplied D. S1,000 overapplied E S4,000 overappliedExplanation / Answer
Answer is D. $ 1,000 overapplied.
Overheads are applied on the basis of direct professional labour hours.
Standard overhead rate = Standard overhead cost/ Standard direct professional labour hours
Standard overhead rate = $ 150,000/ 15,000 hours = $ 10 per hour
Actual Labour hours = 14,900 hours
Overheads applied = Standard overhead rate X Actual hours
Overheads applied = $ 10 per hour X 14,900 actual hours = $ 149,000
Actual overheads = $ 148,000
Overapplication = $ 149,000 - $ 148,000 = $ 1,000
Applied overheads are more than actuals. Hence, overapplied.
Note:
Kindly note that difference of actual labour cost and standard labour cost will not be considered. Only overheads are applied on the basis of predetermined rate.
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