Morrison and Company uses a predetermined overhead rate. Overhead for the next twelve months is estimated to be $400,000. The company applies overhead as a percentage of direct labor cost, which is estimated to be $500,000 for the next year.
During the year, actual direct labor cost amounted to $520,000 and the actual overhead was as outlined below:
Factory rent $80,000
Indirect materials $40,000
Indirect labor $100,000
Maintenance $80,000
Depreciation $100,000
Payroll taxes $80,000
Others $80,000
Total $560,000
On the basis of the data, complete the following:
Calculate the overapplied or underapplied overhead for the year.