XYZ Company uses a job-order
costing system and applies manufacturing overhead to jobs using a
predetermined overhead rate based on direct labor-hours. Last year
manufacturing overhead and direct labor-hours were estimated at
$75,000 and 30,000 hours, respectively, for the year. At the end of
the year, it was determined that the company worked 29,000 direct
labor-hours for the year and incurred $77,000 in actual
manufacturing overhead costs.
Required: Determine the overhead rate XYZ used per direct
labor-hour during the year.
Determine the underapplied or overapplied overhead for the year. Be
sure to state if it is underapplied or overapplied.