You o pany apples manufacturing overhead to obs using a predetemined o erhead at

Question

You o pany apples manufacturing overhead to obs using a predetemined o erhead ate of 75% o direct abor cost. Any undera pied or o era p ed manufactu ng overhead cost s closed March, the following transactions were recorded by the company to Cost o oods Sold at he end he month. uring Direct labor costs $20,000 Actual manufacturing costs: $17,000 By how rmuch was overhead under ar over applies? Enter overappled as a positive number. Enter underapplied as a negatve number. ENTER YOUR ANSWER WITHOUT DOLLAR SIGNS OR OTHER DISCRIPTIONS

Explanation / Answer

Pre determined overhead = 75% of 20000 = 15000

Since the actual overhead of 17000 is more than the pre determined overhead of 15000, the overhead has been under applied by (17000 -15000) = 2000

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