For FreeFall Company, the predetermined overhead rate is 160% of direct labor co

Question

For FreeFall Company, the predetermined overhead rate is 160% of direct labor cost. During the month, FreeFall incurred $103,410 of factory labor costs, of which $88,370 is direct labor and $15,040 is indirect labor. Actual overhead incurred was $133,672. Compute the amount of manufacturing overhead applied during the month. Determine the amount of under- or overapplied manufacturing overhead. (Round all answers to 0 decimal places, e.g. 150% or $15) Manufacturing overhead applied $ Under- or overapplied manufacturing overhead $

Explanation / Answer

Predetermined overhead is 160% 0f direct labour cost.

1. Predetermined/Applied manufacturing overhead = direct labour cost * 160%

                                                                     = $88,370 * 160

                                                                     =$141,392

2. The amount of under- or overapplied manufacturing cost = Applied overhead cost - actual overhead cost

                                                                                              = $141,392 - $133,672

                                                                                              =$7720 overapplied.

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