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Northface Company applies overhead based upon labor-hours. Budgeted factory overhead was $910,000 and budgeted labor-hours were...

Northface Company applies overhead based upon labor-hours. Budgeted factory overhead was $910,000 and budgeted labor-hours were 32,500. Actual factory overhead was $893,675 and actual labor-hours were 31,560.

Required:

a. Compute the overhead application rate.
b. Compute the amount of overhead applied to production.
c. Determine the amount of over- or underapplied overhead.

Solutions

Expert Solution

a) Overhead application rate= Budgeted Overhead/Actual Labor Hours

                                                =910000/32500= $28 per labor hour

b) Overhead applied for production= Actual labor hours*Overhead application rate

                                                            =31560*28= $883,680

c) Actual overhead(893675) is more than applied overhead(883680).Hence there will be under absorption of overhead.

Actual Overhead
(1)
 Overhead Applied
(2)
 Under applied
Overhead
(3)=(1)-(2)
893675 883680 9995

ekkarill92 answered 2 years ago
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