A manufacturing company applies overhead based on direct labor hours. At the beginning of the year, it estimated that overhead costs would be $450,000 and direct labor hours would be 90,000. Actual overhead costs incurred were $459,000 and actual direct labor hours were 95,000. When the amount of underapplied or overapplied overhead is small, it is usually written off to Solution Ans Ans 2 When the amount of underapplied or overapplied overhead is small, it is usually written off to Cost of Goods Sold, .

1. A manufacturing company applies overhead based on direct labor hours. At the beginning of the
year, it estimated that overhead costs would be $450,000 and direct labor hours would be 90,000.
Actual overhead costs incurred were $459,000 and actual direct labor hours were 95,000.
When the amount of underapplied or overapplied overhead is small, it is usually written off to
Solution
Ans
Ans 2
When the amount of underapplied or overapplied overhead is small, it is usually written off to
Cost of Goods Sold,
Details Details Figures
Pre-Determined Overhead
Rate=Budgeted Overhead
Cost/Budgeted Direct
Labour Hours
450000/90000 5.00
Actual Direct labour Hours 95,000.00
Applied Overhead Actual Direct labour Hours* Pre-determined Rate 4,75,000.00
Actual Ovehead Incurred Applied Overhead-Actual Ovehead Incurred 4,59,000.00
Overapplied Overhead 16,000.00