Juarez, Inc.designs and manufactures custom cabinets.The company uses a job-order costing system, and the allocates overhead at $18 per direct labor hour.Over or underapplied overhead is not material.During May, Juarez's transactions included the following: $\begin{array}{lr}
\text { Direct labor cost incurred at } \$ 15 \text { an hour } & \$ 5,400 \
\text { Manufacturing overhead cost incurred } & 6,800 \
\text { Direct materials purchased } & 11,500 \
\text { Raw materials inventory, beginning } & 160\
\text { Raw materials inventory, ending } & 280 \
\text { Sales } & 23,000 \
\text { Selling expenses } & 2,100 \
\text { Work in process inventory, beginning } & 220 \
\text { Work in process inventory, ending } & 250
\end{array}$ How much is over or underapplied overhead for May?

Question

Quizplus · Accepted Answer

Over or underapplied overhead is calculated by comparing the actual overhead costs to the applied overhead. The applied overhead is calculated as the direct labor hours multiplied by the overhead rate. Direct labor cost is $5,400 at $15 an hour, which means 360 hours were worked ($5,400 / $15). The applied overhead is therefore 360 hours * $18 = $6,480. The actual overhead cost incurred is $6,800. Thus, the overhead is underapplied by $320 ($6,800 - $6,480).

Juarez, Inc How Much Is Over or Underapplied Overhead for May? A)$320

Juarez, Inc How Much Is Over or Underapplied Overhead for May?
A)$320