Applied Manufacturing Overhead For Karr Company, the predetermined overhead rate is 140% of direct labor cost. During the month, Karr incurred $90,000 of factory labor costs, of which $80,000 is direct labor and $10,000 is indirect labor. Actual overhead incurred (including indirect labor) was

Question

Applied Manufacturing Overhead

For Karr Company, the predetermined overhead rate is 140% of direct labor cost. During the month, Karr incurred $90,000 of factory labor costs, of which $80,000 is direct labor and $10,000 is indirect labor. Actual overhead incurred (including indirect labor) was $119,000.

Compute the amount of manufacturing overhead applied during the month. Determine the amount of under- or overapplied manufacturing overhead.

Accepted Answer

Manufacturing overhead applied = (140% × $80,000) = $112,000
Underapplied manufacturing overhead = ($119,000 − $112,000) = $7,000

ACTION PLAN
• Calculate the amount of overhead applied by multiplying the predetermined overhead rate by actual activity.
• If applied overhead is less than actual, overhead is underapplied.
• If applied overhead is greater than actual, overhead is overapplied.

Related exercise material: BE2.10, DO IT! 2.5, E2.4, E2.5, E2.9, and E2.13.

Question 2.DI.5: Applied Manufacturing Overhead For Karr Company, the predete...

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