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Under-applied or Over-applied Manufacturing Overhead

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Smith Jones Company uses a predetermined overhead rate of 75% of direct labor cost. This predetermined rate was based on $60,000 estimated direct labor cost and $45,000 of estimated total manufacturing overhead. The company incurred actual total manufacturing overhead costs of $52,000 and $71,000 of direct labor cost during the period.

What is the amount of under-applied or over-applied manufacturing overhead? Show computations.

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Solution Summary

This solution shows how to calculate the amount of under- or over-applied manufacturing overhead costs, given the estimated and actual labor costs and manufacturing overhead for a given company.

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