The following data is provided for ABC company budgeted overhead for the year is

Question

The following data is provided for ABC company

budgeted overhead for the year is $400,000

projected direct labor cost for the year -$100,000

eduring tstimated machine hours for the year -20,000

estimated direct labor hours for the year -20,000

overhead is applied to product based on direct labor costs,

during the month of june the company incurred 3000 labor hours used 2500 machine hours incurred #30,000 of labor costs and $75,000 of overhead cost

calculate

a. the overhead cost

b. the amount of overhead applied in june

c, the over or underapplied overhead for june and explain what it means

Explanation / Answer

Budgeted Overhead = $400,000 projected direct labor cost 100000 Estimated MHRS 20000 hrs Estimed DL hrs 20000 hrs a) Actual Overhead Cost = $75000 b) Amount of applied overhead Predetermined Overhead rate per labour hr = Budgeted Overhead/Estimated DL Hrs = $400000/20000 hrs $20 per DL hr Applied Overhead= Actual DL hrs worked*Predetermined overhead rate = 3000 hrs * $20 $ 60,000.00 c) Actual Overhead 75000 Applied Overhead 60000 Underapplied Overhead 15000 This means, the appliedoverhead is less than the actual overhead incurred by thecompay

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