Verizox Company uses a job order cost system with manufacturing overhead applied

Question

Verizox Company uses a job order cost system with manufacturing overhead applied to products based on direct labor hours. At the beginning of the most recent year, the company estimated its manufacturing overhead cost at $172,980. Estimated direct labor cost was $435,240 for 18,600 hours.

Actual costs for the most recent month are summarized here:   

Required:
1. Calculate the predetermined overhead rate. (Round your answer to 2 decimal places.)



2. Calculate the amount of applied manufacturing overhead.



3. Calculate actual manufacturing overhead costs.



4. Compute over- or underapplied overhead. (Input the amount as positive value.)

Item Description Total Cost Direct labor (1,860 hours) $ 43,525 Indirect costs Indirect labor 2,430 Indirect materials 3,380 Factory rent 3,240 Factory supervision 4,810 Factory depreciation 5,640 Factory janitorial work 1,150 Factory insurance 1,830 General and administrative salaries 4,250 Selling expenses 5,380

Explanation / Answer

1. Computation of predetermined overhead rate

predetermined overhead rate = Estimated Manufacturing OH / Estimated Hours

predetermined overhead rate = $172980 / 18600

Predetermined overhead rate = $9.30 pere hour

2. Computation of the amount of applied manufacturing overhead.

Applied manufacturing overhead.= Actual Hours Worked * Pre determined OH Rate

Applied manufacturing overhead.= $17298

3. Computation of actual manufacturing overhead costs.

Actual manufacturing overhead costs = Total Indirect Costs + Factory Costs

Actual manufacturing overhead costs = $2430 + $3380 + $3240 + $4810 + $5640 + $1150 + $1830

Actual manufacturing overhead costs = $22480

4. Computation of over- or underapplied overhead

Actual manufacturing overhead costs = $22480

Applied manufacturing overhead.= $17298

As Actual manufacturing overhead costs > Applied manufacturing overhead, the OH results in Under applied

Underapplied Overheads = Actual manufacturing overhead costs - Applied manufacturing overhead

Underapplied Overheads = $22480 - $17298

Underapplied Overheads = $5182

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