Carey Company applies manufacturing overhead costs to products as a percentage o

Question

Carey Company applies manufacturing overhead costs to products as a percentage of direct labor dollars. Estimated and actual values of manufacturing overhead and direct labor costs are summarized here:

    

Carey Company applies manufacturing overhead costs to products as a percentage of direct labor dollars. Estimated and actual values of manufacturing overhead and direct labor costs are summarized here:

Compute over- or underapplied overhead. Calculate how much of the labor costs would be added to the following accounts: Work in Process Inventory Manufacturing Overhead Selling, General, and Administrative Expenses

Explanation / Answer

question 1

overhead to apply to production. = Estimated Overhead/ estimated direct labor = 900000/600000 = 150%

hence,Applied Manufacturing Overhead = 550,000 x 150% = $825000

Actual Overhead = $850000

Hence, Overhead under applied by ( $850000 - $825000) = $25000

how much of the labor costs would be added to the following accounts

a)Work in Process Inventory = $22500

b)Manufacturing Overhead = $4000+$8000+$2500 = $14500

c)Selling, General, and Administrative Expenses = $9000

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