Brusveen Corporation applies manufacturing overhead to jobs on the basis of direct labor-hours. The following information relates to Brusveen for last year: What was Brusveen's underapplied or overapplied overhead for last year?

Question

Brusveen Corporation applies manufacturing overhead to jobs on the basis of direct labor-hours. The following information relates to Brusveen for last year:  What was Brusveen's underapplied or overapplied overhead for last year?

Quizplus · Accepted Answer

To calculate the overhead rate, we divide the total estimated overhead by the estimated direct labor-hours. 
Overhead Rate = $540,000 / 60,000 DLH 
Overhead Rate = $9 per DLH

Using this overhead rate, we can calculate the total overhead applied to jobs: 
Overhead Applied = Actual DLH x Overhead Rate 
Overhead Applied = 65,000 DLH x $9 per DLH 
Overhead Applied = $585,000

The actual overhead incurred was $576,120, so there was an overapplied overhead of $8,880. Therefore, the correct answer is (C) $8,880 overapplied.

Brusveen Corporation Applies Manufacturing Overhead to Jobs on the Basis