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Management Accounting: Kraken Ltd.

Kraken Ltd. had a balance of $70,275 in work in progress on January 1st, represented by the following two jobs:

Job Number 207
Direct Materials $8,400
Direct Labor $15,300

Job Number 244
Direct Materials $9,000
Direct Labor $7,200

Total Direct Materials $17,400
Total Direct Labor $22,500

At December 31st only one job remained in work in progress, Job 310. Costs associated with this job include direct materials of $22,400 and direct labor of $12,000. Direct labor costs for the year totaled $150,000. Actual manufacturing overhead costs for the year totaled $212,100. Overhead is applied based on direct labor dollars and the current year's rate is the same as the one used in the previous year. Finished Goods inventory had a zero opening balance, and at December 31st had a balance of $65,000, of which $30,000 is applied overhead.

Based on this information what is the under or over applied overhead for the year?

a. $ 525 under applied
b. $ 9,600 under applied
c. $16,725 over applied
d. $23,775 under applied
e. $35,925 under applied

Solution Summary

This solution assists with Kraken Ltd.'s management accounting problem.