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Hamilton Company applies manufacturing overhead costs to products based on direct labor hours. The company estimates manufacturing overhead cost for the year to be $258,000 and direct labor hours to be 20,000. Actual overhead and actual direct labor hours for the year were $280,000 and 22,800 hours, respectively.
Required:
1. Compute over- or underapplied overhead.
2. Which accounts will be affected by the over- or underapplied manufacturing overhead.

Answer :

Answer: See explanation

Explanation:

1. Compute over- or underapplied overhead.

Predetermined Overhead Rate can be calculated as:

= $258,000/20,000

= $12.90 per direct labor hour.

Applied Manufacturing Overhead will be:

= $12.90 × 22,800 direct labor hours

= $294,120

2. . Which accounts will be affected by the over- or underapplied manufacturing overhead?

The accounts that will be affected are:

• Manufacturing overhead and

• Cost of Goods Sold

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