Khat Incorporated makes a single product--a cooling coil used in commercial refrigerators. The company has a standard cost system in which it applies overhead to this product based on the standard labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below:?Budgeted (Planned) Overhead:???Budgeted variable manufacturing overhead$42,450??Budgeted fixed manufacturing overhead71,700??Total budgeted manufacturing overhead$114,150??????Budgeted production (a)30,000 units?Standard hours per unit (b)0.50 labor-hours?Budgeted hours (a) × (b)15,000 labor-hours?????Applying Overhead:???Actual production (a)35,000 units?Standard hours per unit (b)0.50 labor-hours?Standard hours allowed for the
actual production (a) × (b)17,500 labor-hours?????Actual Overhead and Hours:???Actual variable manufacturing overhead$64,125??Actual fixed manufacturing overhead89,700??Total actual manufacturing overhead$153,825??Actual hours17,100 labor-hoursRequired:Determine whether overhead was underapplied or overapplied for the year and by how much.
What will be an ideal response?
Predetermined overhead rate = $114,150/15,000 labor-hours = $7.61 per labor-hour
| ? | Predetermined overhead rate (a) | $7.61 | per labor-hour |
| ? | Standard hours allowed for the actual production (b) | 17,500 | labor-hours |
| ? | Manufacturing overhead applied (a) × (b) | $133,175 | ? |
| ? | Total actual manufacturing overhead | $153,825 | ? |
| ? | Manufacturing overhead underapplied or overapplied | $20,650 | Underapplied |
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