The pickle department of a major food manufacturer has an overhead rate of $5 per direct-labor hour, based on expected variable overhead of $150,000 per year, expected fixed overhead of $350,000 per year, and expected direct-labor hours of 100,000 per year.

Data for the year’s operations follow:

1. What is the underapplied or overapplied overhead for each 6-month period? Label your answer as underapplied or overapplied.

2. Explain briefly (no more than 50 words for each part) the probable causes for the underapplied or overapplied overhead. Focus on variable and fixed costs separately. Give the exact figures attributable to the causes you cite.

Transcribed Image Text:

First 6 months Last 6 months Fixed costs incurred were exactly cqual to hudgeted amounts throughout the ycar. Direct-Labor Hours Used 52,000 42,0x0 Overhead Costs Incurred* $264,000 239,000