Ask Question
25 March, 12:35

A company applies overhead at a rate of 150% of direct labor cost. Actual overhead cost for the current period is $1,150,000, and direct labor cost is $565,000. Determine whether there is over - or underapplied overhead using the T-account below. Factory OverheadActual Overhead 950,000 Overapplied overhead 950,000

+5
Answers (1)
  1. 25 March, 14:28
    0
    Under applied overheads = $302,500

    Explanation:

    Overheads are charged to units produced by the means of an estimated overhead absorption rate. This rate is computed using budgeted overhead and budgeted activity level.

    As a result of this, overhead charged to total units product might be over or under absorbed compared to the actual amount incurred.

    Overhead absorption rate

    =budgeted Overhead/Budgeted labour cost * 100

    This already given in the question as 150% of the direct labour rate

    = 150% of direct labour cost

    Applied overhead = OAR * actual labour cost

    = 150% * $565,000=$847,500

    Under applied overhead = is the difference between actual overhead and applied overhead

    $1,150,000 - $847,500 = $302,500

    Under applied overheads = $302,500

    Here it is under applied because the applied is less than the actual overhead cost
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “A company applies overhead at a rate of 150% of direct labor cost. Actual overhead cost for the current period is $1,150,000, and direct ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers