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    Management Accounting: Kraken Ltd.

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    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

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    Solution Summary

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