Question

Crich Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 21,800 hours and the total estimated manufacturing overhead was $497,040. At the end of the year, actual direct labor-hours for the year were 21,500 hours and the actual manufacturing overhead for the year was $492,040. Overhead at the end of the year was: (Do not round your intermediate calculations.)

A) $6,840 overapplied

B) $6,840 underapplied

C) $1,840 underapplied

D) $1,840 overapplied

Answer 1

Question:

Crich Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 21,800 hours and the total estimated manufacturing overhead was $497,040. At the end of the year, actual direct labor-hours for the year were 21,500 hours and the actual manufacturing overhead for the year was $492,040. Overhead at the end of the year was:

Answer:

Given that,

• Estimated direct labor-hours = 21,800 hours
• Total estimated manufacturing overhead = $497,040

Overhead rate = Total estimated manufacturing overhead / Estimated direct labor-hours

= $497,040/21,800 = 22.80 per hour.

• Actual direct labor-hours for the year = 21,500 hours
• Actual manufacturing overhead for the year =  $4,92,040

Manufacturing Overhead applied = 21,500 hours * 22.80 = $ 4,90,200.

• Overhead at the end of the year is
• Manufacturing Overhead applied - Actual manufacturing overhead

= $ 4,90,200 - $492,040 = ($ 1,840) (underapplied)

Option (C) is the correct answer.