What is the under- or overapplied overhead for the firm? 436,800 x underapplied Feedback V Check My Work 1. The total annual driver level is a factor in this calculation. 2. For departmental rates, OH rates are assigned to each production department either per machine hrs. or direct labor hrs. 3. Calculate over- or underapplied by subtracting Applied OH from Actual OH. Label it over or under. 4. Prepare the journal entry that disposes of the overhead variance calculated in Requirement 3, assuming it is not material in amount.
Predetermined
Primera Company produces two products and uses a predetermined overhead rate to apply overhead. Primera currently applies overhead using a plantwide rate based on direct labor hours. Consideration is being given to the use of departmental overhead rates where overhead would be applied on the basis of direct labor hours in Department 1 and on the basis of machine hours in Department 2. At the beginning of the year, the following estimates are provided:
| Department 1 | Department 2 | ||
| Direct labor hours | 640,000 | 128,000 | |
| Machine hours | 16,000 | 192,000 | |
| Overhead cost | $384,000 | $1,152,000 |
Actual results reported by department and product during the year are as follows:
| Department 1 | Department 2 | ||
| Direct labor hours | 627,200 | 134,400 | |
| Machine hours | 17,600 | 204,800 | |
| Overhead cost | $400,000 | $1,232,000 |
| Product 1 | Product 2 | ||
| Direct labor hours | |||
| Department 1 | 480,000 | 147,200 | |
| Department 2 | 96,000 | 38,400 | |
| Machine hours | |||
| Department 1 | 8,000 | 9,600 | |
| Department 2 | 24,800 | 180,000 |
If the Actual Overhead is more than the applied Overhead then it is called as Underapplied Overhead and if the Actual overhead is less than the Applied Overhead then it its called a Overapplied Overhead.
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