Question
The following information is available for Lock-Tite Company, which produces special-order security products and uses a job order costing system.
Determine whether there is over or underapplied overhead.
April 30 May 31 Inventories Raw materials $ 51,000 $ 68,000 Work in process 11,800 24,500 Finished goods 71,000 51,600 Activities and information for May Raw materials purchases (paid with cash) 226,000 Factory payroll (paid with cash) 377,000 Factory overhead Indirect materials 31,000 Indirect labor 96,000 Other overhead costs 136,000 Sales (received in cash) 1,560,000 Predetermined overhead rate based on direct labor cost 70 % The following information is available for Lock-Tite Company, which produces special-order security products and uses a job order costing system April 3e May 31 Inventories Raw materials Work in process Finished goods $ 68,000 24, 500 51,600 $ 51,000 11,800 71,000 Activities and information for May Raw materials purchases (paid with cash) Factory payroll (paid with cash) Factory overhead 226,000 377,000 Indirect materials Indirect labor Other overhead costs 31,000 96,000 136,000 1,560,000 Sales (received in cash) Predetermined overhead rate based on direct labor cost 70% Determine whether there is over or underapplied overhead Factory Overhead 96,000 31,000 ndirect labor 263,900 Applied overhead ndirect materials 136,900 Overapplied overhead
Explanation / Answer
Total Direct labor cost and overheads applied: Factory Payroll paid 377000 Less: Indirect Labor 96000 Direct Labor cost 281000 OH rate based on DLC 70% Overheads applied 196700 Factory Overheads Raw material Inv. 31000 196700 Applied Overheads Cash 232000 Overheads underapplied 66300
