Sweeten Company had no jobs in progress at the beginning of March and no beginni
ID: 2425796 • Letter: S
Question
Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. It started only two jobs during March-Job P and Job Q. Job P was completed and sold by the end of the March and Job Q was incomplete at the end of the March. The company uses a plantwide predetermined overhead rate based on direct labor-hours. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March): Required: What is the amount of underapplied or overapplied overhead? (Input the amount as positive value.)Explanation / Answer
Total plant-wide overhead ($) = Total fixed overhead + Total variable overhead
= 10,000 + (Variable overhead per hour x Estimated total labour hours)
= 10,000 + (1 x 2,000) = 10,000 + 2,000
= 12,000
Pre-determined overhead rate = $12,000 / 2,000 = $6 per labour hour
Absorbed overhead = $6 x (1,400 + 500) hours = $6 x 1,900 = $11,400
Actual overhead incurred = $12,500
Since actual overhead > Absorbed overhead, Overhead is underapplied by $(12,500 - 11,400) = $1,100
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