Burkett Company uses a standard cost system. Indirect costs were budgeted at $200,000 plus $15 per direct labour hour. The overhead rate is based on 10,000 hours. Actual results were: $$\begin{array} { l r }
\text { Standard direct labour hours } & 9,000 \
\text { Actual direct labour hours } & 10,000 \
\text { Fixed overhead } & \$ 190,000 \
\text { Variable overhead } & \$ 185,000
\end{array}$$ The over- or underapplied overhead was:
A) $50,000 under
B) $10,000 over
C) $60,000 under
D) $20,000 over

Question

Burkett Company uses a standard cost system. Indirect costs were budgeted at $200,000 plus $15 per direct labour hour. The overhead rate is based on 10,000 hours. Actual results were: $$\begin{array} { l r } 
\text { Standard direct labour hours } & 9,000 \
\text { Actual direct labour hours } & 10,000 \
\text { Fixed overhead } & \$ 190,000 \
\text { Variable overhead } & \$ 185,000
\end{array}$$ The over- or underapplied overhead was:
A) $50,000 under
B) $10,000 over
C) $60,000 under
D) $20,000 over

Quizplus · Accepted Answer

The budgeted overhead is $200,000 + ($15 * 10,000) = $350,000. The actual overhead is $190,000 + $185,000 = $375,000. The difference is $375,000 - $350,000 = $25,000 underapplied. However, the standard hours were 9,000, so the applied overhead is $350,000 * (9,000/10,000) = $315,000. The difference between actual and applied is $375,000 - $315,000 = $60,000 underapplied.

Burkett Company Uses a Standard Cost System The Over- or Underapplied Overhead Was: A) $50,000 Under B)

Burkett Company Uses a Standard Cost System The Over- or Underapplied Overhead Was:
A) $50,000 Under
B)