Media, Inc., an advertising agency, applies overhead to jobs on the basis of direct professional labor hours. Overhead was estimated to be $152,000, direct professional labor hours were estimated to be 19,000, and direct professional labor cost was projected to be $285,000.

During the year, Media incurred actual overhead costs of $149,300, actual direct professional labor hours of 18,500, and actual direct labor cost of $279,000.

By year-end, the firm's overhead was:

a) $1,300 underapplied.

b) $1,300 overapplied.

c) $2,700 underapplied.

d) $2,700 overapplied.

e) $4,000 underapplied.

Question

Business

Alaina Daniels

25 March, 08:19

Media, Inc., an advertising agency, applies overhead to jobs on the basis of direct professional labor hours. Overhead was estimated to be $152,000, direct professional labor hours were estimated to be 19,000, and direct professional labor cost was projected to be $285,000.

During the year, Media incurred actual overhead costs of $149,300, actual direct professional labor hours of 18,500, and actual direct labor cost of $279,000.

By year-end, the firm's overhead was:

a) $1,300 underapplied.

b) $1,300 overapplied.

c) $2,700 underapplied.

d) $2,700 overapplied.

e) $4,000 underapplied.

+1

Answers (1)

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Jensen Mckee · Answer 1

b) $1,300 overapplied.

Explanation:

over head is paid on the basis of professional labor cost. Therefore overhead rate is: 152000/19000 = $8

over head payable for the year = (professional labor cost * $8)

= 18500 * $8

= $148000

over head actually paid for the year: $ 149,300

difference is: $149300 - $148000 = $1,300 overapplied.