13-54 Overhead Accounting for Control and for Product Costing
The pickle department of a major food manufacturer has an overhead rate of $5 per direct-labor hour, based on expected variable overhead of $150,000 per year, expected fixed overhead of $350,000 per year, and expected direct-labor hours of 100,000 per year.
Data for the year’s operations follow:
|
Direct Labor Hours Used |
Overhead Costs Incurred* |
|
|
First six months |
55,000 |
262,000 |
|
Last six months |
41,000 |
236,500 |
*Fixed costs incurred were exactly equal to budgeted amounts throughout the year.
1. What is the under applied or over applied overhead for each six-month period?
Label your answer as under applied or over applied.
2. Explain briefly (not more than 50 words for each part) the probable causes for the under applied or over applied overhead. Focus on variable and fixed costs separately. Give the exact figures attributable to the causes you cite.