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Crich Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 22,200 hours and the total estimated manufacturing overhead was $594,960. At the end of the year, actual direct labor-hours for the year were 22,150 hours and the actual manufacturing overhead for the year was $594,960. Overhead at the end of the year was: Multiple Choice $1,390 underapplied $1,340 overapplied $1,340 underapplied $1,390 overapplied
Crich Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 22,200 hours and the total estimated manufacturing overhead was $594,960. At the end of the year, actual direct labor-hours for the year were 22,150 hours and the actual manufacturing overhead for the year was $594,960. Overhead at the end of the year was: Multiple Choice $1,390 underapplied $1,340 overapplied $1,340 underapplied $1,390 overapplied
Final answer:The overhead at the end of the year is $1,340 underapplied.Explanation:The predetermined overhead rate is calculated by dividing the estimated manufacturing overhead by the estimated direct labor-hours.In this case, the estimated manufacturing overhead was $594,960 and the estimated direct labor-hours were 22,200 hours, resulting in a predetermined overhead rate of $26.80 per direct labor-hour ($594,960 / 22,200 = $26.80).To determine whether overhead was overapplied or underapplied at the end of the year, we need to compare the actual manufacturing overhead with the overhead applied based on the actual direct labor-hours.The actual manufacturing overhead was $594,960 and the actual direct labor-hours were 22,150 hours, resulting in a total applied overhead of $594,920 ($26.80 x 22,150 = $594,920).Since the applied overhead is slightly less than the actual overhead, the overhead at the end of the year is $1,340 underapplied ($594,960 - $594,920 = $1,340)....