Exercise 1413 ac Crane Decorating uses a job order cost syst

Exercise 14-13 a-c Crane Decorating uses a job order cost system to collect the costs of its interior decorating business. Each client\'s consultation is treated as a separate job. Overhead is applied to each job based on the number of decorator hours incurred. Listed below are data for the current year. Estimated overhead Actual overhead Estimated decorator hours Actual decorator hours 5960,000 $982,800 40,000 40,000 The company uses Operating Overhead in place of Manufacturing Overhead. Your answer is correct. Compute the predetermined overhead rate. (Round answer to 2 decimal places, e.g. 25.55.) Predetermined overhead rate Attempts: 1 of 5 used | v\'| Your ?nswers correct. Determine the amount of overhead to apply for the year. Amount of overhead appliesd ½6000 Attempts: 2 of 5 used Determine whether the overhead was under- or overapplied and by how much. overhead

Solution

Predetermined overhead rate=Estimated overhead/Estimated decorator hours

=(960000/40000)=$24 per decorator hour.

Amount of overhead applied=(Predetermined overhead rate*Actual decorator hours)

=(24*40000)=$960000

Hence since overhead applied is less than actual overhead;

overhead underapplied=(982800-960000)=$22800