Urquhart Corporation applies manufacturing overhead on the basis of direct labor

Question

Urquhart Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $102,000 and 4,000 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $105,000 and the actual direct labor-hours were 3,800. Instructions: 1.) If rounding is required, then round your answer to the nearest whole dollar. Rounding, if applicable, should not be done until a final answer is reached. 2.) Omit the "$" sign in your response. Do not use brackets for negative numbers. Use a minus sign for underapplied amounts and no sign for overapplied amounts. Overhead for the year was overapplied (+) or underapplied (-) by how much?

Explanation / Answer

Applied OH= 100,000 , direct labor hours= 3600

Actual OH= 105,000 , direct labor hours= 3600

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Applied--> POHR = (estimated MOH) / (estimated cost driver)
POHR = ( 100,000 ) / ( 3600 ) = $27.77777778 per labor hour

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$27.77777778 (per hour) x 3800 (actual-direct labor hours) = 105,555.5556

==

105,000 - 105,555.5556 = -556 (rounded to nearest whole dollar)

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FINAL ANSWER $556 overapplied

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