Gaters Incorporated makes a single product--an electrical motor used in many long-haul trucks. The company has a standard cost system in which it applies overhead to this product based on the standard labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below:
The company incurred a total of $240,080 in manufacturing overhead cost during the year.
Required:
Determine whether overhead was underapplied or overapplied for the year and by how much.

Question

Gaters Incorporated makes a single product--an electrical motor used in many long-haul trucks. The company has a standard cost system in which it applies overhead to this product based on the standard labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below:

The company incurred a total of $240,080 in manufacturing overhead cost during the year.
Required:
Determine whether overhead was underapplied or overapplied for the year and by how much.

Taylor O'Rourke · Accepted Answer

Final Answer : Predetermined overhead rate = $272,000/40,000 labor-hours = $6.80 per labor-hour

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