The Murphy Manufacturing Company distributes overhead based on direct labour dollars. The estimated manufacturing overhead for the year was $728 000 and the estimated direct labour dollars for the year were $160 000. Indicate the amount of underapplied or overapplied overhead if actual direct labour was $148 000 and actual manufacturing overhead was $665 000.

Question

Quizplus · Accepted Answer

The overhead application rate is calculated as estimated manufacturing overhead divided by estimated direct labour dollars, which is $728,000 / $160,000 = 4.55. With actual direct labour at $148,000, the applied overhead is 4.55 * $148,000 = $673,400. The actual manufacturing overhead was $665,000, so the difference is $673,400 - $665,000 = $8,400 overapplied.

The Murphy Manufacturing Company Distributes Overhead Based on Direct Labour