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During 2017, Cotte Manufacturing expected Job No. 59 to cost $300,000 of overhead, $500,000 of materials, and $200,000 in labor. Cotte applied overhead based on direct labor cost. Actual production required an overhead cost of $295,000, $570,000 in materials used, and $220,000 in labor. All of the goods were completed. How much is the amount of over- or underapplied overhead?

Please show me how you do it along with the answer.

a) 35,000 underapplied

b) 5,000 overapplied

c) 35,000 overapplied

d) 5,000 underapplied

Respuesta :

Answer:

c) 35,000 overapplied

Explanation:

The computation of the  amount of over- or under applied overhead is as follows

First, the predetermined overhead rate is

= (Expected overhead) ÷ (direct labor cost)

= ($300,000) ÷ ($200,000)

= 150%

Now the applied overhead is

= 150% × $220,000

= $330,000

And, the actual overhead is $295,000

So, the over applied overhead is

= Applied overhead - actual overhead

= $330,000 - $295,000

= $35,000 over applied

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