Manufacturing overhead—over/underapplied Creative Lighting, Inc., makesspecialty table lamps. Manufacturing overhead is applied to production on a direct labor hours basis. During June, the first month of the company’s fiscal year, $56,520 of manufacturing overhead was applied to Work in Process Inventory using the predetermined overhead application rate of $6 per direct labor hour.Required:a. Calculate the number of hours of direct labor used during June.b. Actual manufacturing overhead costs incurred during June totaled $49,340.Calculate the amount of over- or underapplied overhead for June.c. Identify two possible explanations for the over- or underapplied overhead.d. Explain the accounting appropriate for the over- or underapplied overhead at the end of June.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Manufacturing
specialty table lamps. Manufacturing overhead is applied to production on a direct labor hours basis. During June, the first month of the company’s fiscal year, $56,520 of manufacturing overhead was applied to Work in Process Inventory using the predetermined overhead application rate of $6 per direct labor hour.
Required:
a. Calculate the number of hours of direct labor used during June.
b. Actual
c. Identify two possible explanations for the over- or underapplied overhead.
d. Explain the accounting appropriate for the over- or underapplied overhead at the end of June.
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