The McIntyre Manufacturing Company distributes overhead based on direct labour dollars. The estimated manufacturing overhead for the year was $484 000 and the estimated direct labour dollars for the year were $110 000. Indicate the amount of underapplied or overapplied overhead if actual direct labour was $98 000 and actual manufacturing overhead was $418 800.

Question

Quizplus · Accepted Answer

The overhead application rate is calculated as estimated manufacturing overhead divided by estimated direct labour dollars, which is $484,000 / $110,000 = 4.4. With actual direct labour at $98,000, the applied overhead is $98,000 * 4.4 = $431,200. The actual manufacturing overhead was $418,800, so the difference is $431,200 - $418,800 = $12,400, indicating overhead was overapplied.

The McIntyre Manufacturing Company Distributes Overhead Based on Direct Labour