Baka Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $241,800 and 6,800 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $243,400 and actual direct labor-hours were 5,300.The overhead for the year was: (Round your intermediate calculations to 2 decimal places.)
A) $53,332 underapplied
B) $54,932 underapplied
C) $53,332 overapplied
D) $54,932 overapplied

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated as total estimated overhead divided by estimated direct labor-hours: $241,800 / 6,800 hours = $35.56 per direct labor-hour. The applied overhead based on actual hours worked is then $35.56 * 5,300 hours = $188,468. The actual overhead was $243,400, so the difference is $243,400 - $188,468 = $54,932 underapplied.

Baka Corporation Applies Manufacturing Overhead on the Basis of Direct