The Brookstone Company produces 9 volt batteries and AAA batteries. The Brooksto

Question

The Brookstone Company produces 9 volt batteries and AAA batteries. The Brookstone Company uses a plantwide rate to apply overhead based on direct labor hours. The following data is given:

How much was overhead over/underapplied?

Actual Overhead $325,000 Estimated Overhead $350,000 Estimated Activity: 9 volt battery 100,000 direct labor hours AAA battery 400,000 direct labor hours Actual Activity: 9 volt battery 125,000 direct labor hours AAA battery 400,000 direct labor hours Units Produced: 9 volt battery 500,000 AAA battery 250,000

Explanation / Answer

Overhead rate = 350000/500000 = 0.70 per labour hour

Overhead applied = (125000+400000)*0.70 = 367500

Under/over applied overhead = applied overhead-actual overhead

= 367500-325000

Over applied overhead = 42500

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