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2 April, 21:24

Kirkaid Company recorded the following transactions for the just completed month:

a. $118,000 in raw materials were requisitioned for use in production. Of this amount, $89,000 was for direct materials and the remainder was for indirect materials.

b. Total labor wages of $142,000 were incurred. Of this amount, $122,000 was for direct labor and the remainder was for indirect labor.

c. Additional actual manufacturing overhead costs of $214,000 were incurred.

d. A total of $268,000 in manufacturing overhead was applied to jobs.

Required:

Determine the underapplied or overapplied overhead for the month.

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Answers (1)
  1. 2 April, 23:32
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    The correct answer is $5,000.

    Explanation:

    According to the scenario, the given data are as follows:

    Total raw material = $118,000

    Direct material = $89,000

    So, Indirect material = Total raw material - Direct material = $118,000 - $89,000

    = $29,000

    Total labor = $142,000

    Direct labor = $122,000

    So, Indirect labor = Total labor - Direct labor = $142,000 - $122,000

    = $20,000

    Additional actual manufacturing OH = $214,000

    Applied manufacturing OH = $268,000

    So, we can calculate the underapplied or overapplied overhead for the month by using following formula:

    Underapplied or overapplied overhead = Applied manufacturing OH - Actual OH

    = $268,000 - ($29,000 + $20,000 + $214,000)

    = $268,000 - $263,000

    = $5,000

    Hence, the overapplied overhead is $5,000.
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