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:
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

How much was overhead over/underapplied?

Answer 1

Answer:

Over applied Overhead =$ 42,500

Explanation:

Actual Overhead $325,000

Estimated Overhead $350,000

Over applied overhead is when the Predetermined overhead is more than the actual overhead . Under applied overhead is when the Predetermined overhead is less than the actual overhead .

Predetermined Overhead rate= Overhead / total direct labor hours

                              = 350,000/ 500,000 (100)= 70%

Applied Overhead = Predetermined Overhead rate( actual direct labor hours)

                               = 70 % (525,000) = $367,500

Applied Overhead $367,500

Less Actual Overhead $325,000

Over applied Overhead =$ 42,500