Question

EB11. LO 4.6A company has the following information relating to its production costs: A chart of information including: Machine hours 25,000, Direct labor cost $550,000, Indirect labor 45,000, Plant maintenance 259, 300, Plant supervision 90,000, Plant depreciation 150,000, Plant utilities 48,000, Indirect material 5,000. Compute the actual and applied overhead using the company’s predetermined overhead rate of $23.92 per machine hour. Was the overhead overapplied or underapplied, and by how much?

Answer 1

Answer:

Total overheads = Indirect labor + Plant maintenance + Plant supervision + Plant depreciation + Plant utilities + Indirect materials

Total overheads = 45000 + 259300 + 90000 + 150000 + 48000 + 5000 

Total overheads = $597,300

Actual overhead rate = Total overheads/Machine Hours

Actual overhead rate = 597300 / 25000

Actual overhead rate = $23.892

While Applied overhead rate = $23.92

Conclusion: The actual overhead rate is less than applied or absorbed rate, therefore there is overhead over applied and it is by $0.028