In: Accounting
Everbuilt Company had no jobs in progress at the beginning of June and no beginning inventories. It started only two jobs during June—Job L and Job W. Job L was completed and sold by the end of June and Job W was incomplete at the end of June. The company uses a plantwide predetermined overhead rate based on direct labor-hours. The following additional information is available for the company as a whole and for Jobs L and W (all data and questions relate to the month of June):
Estimated total fixed manufacturing overhead. . . . . . . . . . . . . . . . . . . . . . . . . . $30,000
Estimated variable manufacturing overhead per
direct labor-hour. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3.00
Estimated total direct labor hours to be worked. . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Total actual manufacturing overhead costs incurred. . . . . . . . . . . . . . . . . . . . . $47,500
Job L Job W
Direct materials. . . . . . . . . . . . . . . . . . . . . . $39,000 $24,000
Direct labor cost. . . . . . . . . . . . . . . . . . . . . . $62,000 $22,500
Actual direct labor hours worked. . . . . . . . 4,200 1,500
What is the amount of underapplied or overapplied overhead?
please give step by step instructions
Estimated Variable Manufacturing Overhead per direct labor-hour
= $3.00
Estimated Fixed Manufacturing Overhead = $30,000
Estimated direct labor-hours = 6,000
Estimated Manufacturing Overhead = Estimated Variable
Manufacturing Overhead per direct labor-hour * Estimated direct
labor-hours + Estimated Fixed Manufacturing Overhead
Estimated Manufacturing Overhead = $3.00 * 6,000 + $30,000
Estimated Manufacturing Overhead = $48,000
Predetermined Overhead Rate = Estimated Manufacturing Overhead /
Estimated direct labor-hours
Predetermined Overhead Rate = $48,000 / 6,000
Predetermined Overhead Rate = $8.00
Actual direct labor-hours worked = Actual direct labor-hours
worked under Job L + Actual direct labor-hours worked under Job
W
Actual direct labor-hours worked = 4,200 + 1,500
Actual direct labor-hours worked = 5,700
Manufacturing Overhead applied = Predetermined Overhead Rate *
Actual direct labor-hours worked
Manufacturing Overhead applied = $8.00 * 5,700
Manufacturing Overhead applied = $45,600
Underapplied Manufacturing Overhead = Actual Manufacturing
Overhead - Manufacturing Overhead applied
Underapplied Manufacturing Overhead = $47,500 - $45,600
Underapplied Manufacturing Overhead = $1,900