Question
In: Accounting
Wilson Enterprises applies overhead based on direct labor cost. The company estimates that their overhead for...
Wilson Enterprises applies overhead based on direct labor cost. The company estimates that their overhead for the year will be $240,000, and direct labor cost to be $300,000. Actual direct labor cost for Martinez Manufacturing was $280,000 and actual overhead costs were $220,000. At the end of the year, manufacturing overhead was:
1. Overapplied by $20,000.
2. Underapplied by $20,000.
3. Overapplied by $4,000.
4. Underapplied by $4,000.
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3. Overapplied by $4,000.
Working:
| Overhead rate | = | Estimated Overhead/Estimated direct labor cost | |||||||||
| = | $ 2,40,000 | / | $ 3,00,000 | ||||||||
| = | $ 0.80 | Per direct labor cost | |||||||||
| Applied Overhead | = | Actual Labor cost*Overhead rate | |||||||||
| = | $ 2,80,000 | x | $ 0.80 | Per direct labor cost | |||||||
| = | $ 2,24,000 | ||||||||||
| Actual Overhead cost | $ 2,20,000 | ||||||||||
| Applied Overhead is more than actual overhead.So, at the end of year manufacturing overhead was overappliedd by $ 4,000. | |||||||||||
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over-applied by $10,000
over-applied by $20,000
over-applied by $30,000
over-applied...
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