Problem - Brentwood Associates uses a job-order costing system and applies overhead on the basis of direct labor hours. At the beginning of the year, management estimated that 26,000 direct labor hours would be worked and $1,300,000 of manufacturing overhead costs would be incurred.
During the year, the company actually worked 24,000 direct labor hours and incurred the following manufacturing costs:
Direct Materials used in production 1,240,000
Direct Labor 1,800,000
Indirect labor 280,000
Indirect materials 220,000
Insurance 150,000
Utilities 190,000
Repairs and Maintenance 180,000
Depreciation 320,000
1. Calculate the predetermined overhead application rate for the year.
2. Determine the amount of manufacturing overhead applied to work in process during the year
3. Determine the amount of underapplied or overapplied overhead for the year.