Tiffany charges manufacturing overhead to products by using a predetermined appl
ID: 2459422 • Letter: T
Question
Tiffany charges manufacturing overhead to products by using a predetermined application rate, computed on the basis of labor hours. The following data pertain to the current year: Budgeted manufacturing overhead: $ 3,900,000
Actual manufacturing overhead: $ 3,917,000
Budgeted labor hours: 130,000
Actual labor hours: 132,300
Which of the following choices is the correct status of manufacturing overhead at year-end? Overapplied by $17,000. Underapplied by $17,000. Overapplied by $52,000. Underapplied by $52,000. Overapplied by $69,000.
Explanation / Answer
Recovery rate per hour:
= $3,900,000/130,000
= $30 per hour.
Applied overheads:
= $30×132,300
= $3,969,000
Overheads over applied:
= Applied overheads – Actual overheads
= $3,969,000-$3,917,000
= $52,000 over applied