Eminem, Inc.manufactures music CDs.At the start of 2017, Eminem planned to produce 108,000 CDs for which the standard cost for each CD is: $\begin{array}{lr}
\text { Plastic (0.25 pounds at } \$ 6.00 \text { per pound) } & \$ 1.50 \
\text { Labor }(0.10 \text { hour at } \$ 12.00 \text { per hour) } & 1.20 \
\text { Overhead ( } \$ 0.80 \text { fixed and } \$ 0.60 \text { variable) } & \underline{1.40} \
\text { Total } & \$ \underline{\underline{4.10}}
\end{array}$ Overhead is allocated based on the number of units produced.Eminem isolates material purchase variances at the point of purchase.The following information summarizes Eminem's results for 2017: $\begin{array}{lr}
\text { Actual production } & 110,000 \text { CDs } \
\text { Actual variable overhead } & \$ 65,000 \
\text { Actual fixed overhead } & \$ 83,000
\end{array}$
How much is under or overapplied overhead for 2017?

Question

Quizplus · Accepted Answer

Overhead is applied based on the number of units produced. The standard cost per unit is $4.10, and the actual production was 110,000 CDs. Therefore, the total standard overhead cost is $4.10 * 110,000 = $451,000. The actual overhead cost is $65,000 (variable) + $83,000 (fixed) = $148,000. Therefore, the overapplied overhead is $451,000 - $148,000 = $303,000.

Eminem, Inc Overhead Is Allocated Based on the Number of Units Produced