managerial accting

Malcolm Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs.

     

On september 1, the estimates for the month were:
Manufacturing overhead	$20,010
Direct labor-hours	13,800
During september, the actual results were:
Manufacturing overhead	$21,310
Direct labor-hours	12,700

    

The cost records for September will show: (Round your intermediate calculations to 2 decimal places.)

	Under applied manufacturing overhead of $1,300
	Overapplied manufacturing overhead of $2,895
→	Under applied manufacturing overhead of $2,895
	Overapplied manufacturing overhead of $1,300

Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base

= $20,010 ÷ 13,800 direct labor-hours

= $1.45 per direct labor-hour

Applied overhead = Predetermined overhead rate × Actual direct labor-hours

= $1.45 per direct labor-hour × 12,700 direct labor-hours

= $18,415

Overapplied/underapplied manufacturing overhead = Applied/Actual manufacturing overhead − Actual/Applied overhead

= $21,310 − $18,415

= $2,895 Underapplied