For Karr Company, the predetermined overhead rate is 140% of direct labor cost. During the month, Karr incurred $90,000 of factory labor costs, of which $80,000 is direct labor and $10,000 is indirect labor. Actual overhead incurred was $119,000.
Compute the amount of manufacturing overhead applied during the month. Determine the amount of under- or over applied manufacturing overhead.
Calculate the amount of overhead applied by multiplying the predetermined overhead rate by actual activity.
If actual manufacturing overhead is greater than applied, manufacturing overhead is under applied.
If actual manufacturing overhead is less than applied, manufacturing overhead is over applied.