The controller has asked you to distribute and record factory overhead to the various production orders that are processed during a year.
The following information was taken from the annual budget:
Direct labor hours............84,000
Machine hours...............120,000
Manufacturing costs:
Direct labor.................................$525,000
Direct materials..............................180,000
Indirect labor..................................75,000
Electric power................................48,000
Payroll taxes ..................................12,600
Machine maintenance and repair............9,200
Factory supplies..............................16,000
Factory heat and light........................14,000
Depreciation, taxes, and insurance:
Factory buildings............135,000
Machinery.........................320, 200
...................................$1,335,000
Actual results for the year follow:
Direct labor hours.........................85,000
Machine hours...................... 110,000
Manufacturing costs:
Direct labor......................$ 540,000
Direct material.....................200,000
Factory overhead......................625000
............................................$1,365,000
Required:
a. Determine the factory overhead application rate under the direct labor hour method (show calculations).
b. Determine the under- or over-applied factory overhead (show calculations).