For Road Patch Company labor is the highest single expense
For Road Patch Company, labor is the highest single expense, totaling $693,000 for 75,000 hours of work last year. Overhead costs for last year were $900,000 and were applied to specific jobs on the basis of labor hours worked. This year, the company anticipates a 25 percent increase in overhead costs. Labor costs will increase by $130,000, and the number of hours worked is expected to increase by 20 percent.
1. Determine the total amount of overhead anticipated this year.
2. Compute the overhead rate for this year.
3. At the end of this year, Road Patch had compiled a total of 89,920 labor hours worked. The actual overhead incurred was $1,143,400.
a. Using the overhead rate computed in 2, determine the total amount of overhead applied to operations during the year.
b. Compute the amount of under/overapplied overhead for the year.
c. Will the Cost of Goods Sold account be increased or decreased to correct the under/over application of overhead?

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