Osborn Manufacturing uses a predetermined overhead rate of $18.20 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $218,400 of total manufacturing overhead for an estimated activity level of 12,000 direct labor-hours. The company actually incurred $215,000 of manufacturing overhead and 11,500 direct labor-hours during the period. Determine the amount of underapplied and overapplied manufacturing overhead of the repiod.

The amount of $5,700 represents under applied overhead.

Explanation:

The computation of the amount of the under applied and over applied manufacturing overhead is shown below:

= Applied overhead - actual overhead

where,

Applied overhead equals to

= Actual level of direct labor hours * overhead rate per direct labor-hour

= 11,500 direct labor hours * $18.20

= $209,300

And, the actual overhead is $215,000

Now put these values to the above formula

So, the answer would be equal to

= $209,300 - $215,000

= - 5,700

So, the negative amount represents under applied overhead of $5,700