Crich Corporation uses direct labor-hours in its predetermined overhead rate.At the beginning of the year,the estimated direct labor-hours were 21,800 hours and the total estimated manufacturing overhead was $497,040.At the end of the year,actual direct labor-hours for the year were 21,500 hours and the actual manufacturing overhead for the year was $492,040.Overhead at the end of the year was:
A) $6,840 overapplied
B) $6,840 underapplied
C) $1,840 underapplied
D) $1,840 overapplied

Question

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base
= $497,040 ÷ 21,800 direct labor-hours
= $22.80 per direct labor-hour
Overhead applied = Predetermined overhead rate × Amount of the allocation base incurred
= $22.80 per direct labor-hour × 21,500 direct labor-hours
= $490,200
Overhead over or underapplied
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Crich Corporation Uses Direct Labor-Hours in Its Predetermined Overhead Rate