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5 June, 16:32

Crich Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 22,160 hours and the total estimated manufacturing overhead was $585,024. At the end of the year, actual direct labor-hours for the year were 22,150 hours and the actual manufacturing overhead for the year was $585,024.

Overhead at the end of the year was:

a.$314 overapplied

b.$314 underapplied

c.$264 underapplied

d. 264 overapplied

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Answers (1)
  1. 5 June, 19:58
    0
    The correct answer is option (c) $264 underapplied

    Explanation:

    Given data;

    Direct labour hour = 22160

    Total Manufacturing overhead cost = $585,024

    Actual direct labor hour = 22150

    Actual Manufacturing overhead cost = $585024

    Calculating the Predetermine overhead rate using the formula;

    Predetermined Overhead rate=Total Overhead Cost/Total Direct Labor Hour

    Predetermined Overhead rate = $585024/22160

    =$26.4 per labor hour

    To determine the under-applied amount of overhead cost, we use the formula;

    Under-Applied amount = Estimated Overhead Cost*Actual Overhead Cost

    Substituting into the formula, we have

    (22150*26.4) - 585024

    Under applied = $ 264
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