Question

Pepper Corporation is a manufacturer that uses job-order costing. The company closes out any over-applied or under-applied manufacturing overhead to Cost of Goods Sold at the end of the year. The company has supplied the following data for the just-completed year: Estimated total manufacturing overhead at the beginning of the year $481,250 Actual total manufacturing overhead cost incurred $644,000 Estimated direct labor-hours at the beginning of the year 35,000 hours Actual direct labor-hours 40,000 hours
Predetermined overhead rate $13.75/DL hour
Manufacturing overhead is over-applied or under-applied by:

Answer 1

Answer:

$94,000 under-applied

Explanation:

The computation of the manufacturing overhead over applied or under applied is shown below:

Since the predetermined overhead rate is given So applied manufacturing overhead is

= Actual direct labor-hours × predetermined overhead rate

= 40,000 hours × $13.75

= $550,000

So, the over applied or under applied is

So, the ending overhead equals to

= Actual manufacturing overhead - applied overhead

= $644,000 - $550,000

= $94,000 under-applied