BONUB 10 PoIn The following costs were incurred in a project to redecorate the m

Question

BONUB 10 PoIn The following costs were incurred in a project to redecorate the mayor's otices. Fine &Associates; is an interior decorating firm in Tucson Direct Materials Direct Labor S58,000 $80,000 hefir comp its Manfacturing Overhead Rate using the below amounts as the overhead is driven by direct professional labor costs: (both in dollars) Budgeted overhead Budgeted direct professional labor $800,000 640,000 Actual professional labor for all Fine & Assoc jobs, were $555,000 and actual overhead was $703,000. Required A. Determine the total cost to redecorate the mayor's offices. B. Calculate the under- or overapplied overhead for the year for F& Assoc. Be sure to label your answer

Explanation / Answer

Computation of total cost to redecorate the mayor's office Direct Materials $58,000 Direct Labour $80,000 Overheads assigned [$1.25 * $80000] $100,000 Total Cost to redecorate the mayor's office $238,000 Overhead allocation rate = Budgeted Overheads / Budgeted direct professional labour Overhead allocation rate = $800000/$640000 = $1.25 per direct professional labour dollar Calculation of under or overapplied overhead for the year for F & Associates Overhead applied = Actual professional labour * Overhead allocation rate = $555000 * $1.25 = $6,93,750 Actual Overhead cost = $703000 Underapplied Overhead cost = Actual Overhead cost - Applied overhead cost = $703000 - $693750 = $9250

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