Fine & Associates is an interior decorating firm in Tucson. The following costs were incurred in a project to redecorate the mayor's offices:
Direct material ........................................................... $ 29,000
Direct professional labor ........................................... 42,000
The firm's budget for the year included the following estimates:
Budgeted overhead ............................................... $800,000
Budgeted direct professional labor ......................... 640,000
Overhead is applied to contracts by using a predetermined overhead rate that is based on direct professional labor cost. Actual professional labor during the year was $655,000 and actual overhead was $793,000.
Required:
A. Determine the total cost to redecorate the mayor's offices.
B. Calculate the under- or overapplied overhead for the year. Be sure to label your answer.