Question

Carey Company applies manufacturing overhead costs to products as a percentage of direct labor dollars. Estimated and actual values of manufacturing overhead and direct labor costs are summarized here: Estimated Actual Direct labor cost $ 3100,000 $ 260,000 Manufacturing overhead 576,600 501,600 Required:Compute underapplied overhead.

Answer 1

Answer:

$18,000

Explanation:

Predetermined overhead rate:

= (Manufacturing overhead ÷ Direct labor cost) × 100

= (576,600 ÷ 310,000) × 100

= 1.86 × 100

= 186%

Underapplied overhead:

= Actual overhead - Estimated overhead

= $501,600 - (Actual direct labor cost × Predetermined overhead rate)

= $501,600 - ($ 260,000 × 186%)

= $501,600 - $483,600

= $18,000