Leak Enterprises LLC recorded the following transactions for the just completed month. The company had no beginning inventories.(1) Raw materials purchased for cash, $96,000(2) Direct materials requisitioned for use in production, $69,000(3) Indirect materials requisitioned for use in production, $22,000(4) Direct labor wages incurred and paid, $129,000(5) Indirect labor wages incurred and paid, $16,000(6) Additional manufacturing overhead costs incurred and paid, $121,000(7) Manufacturing overhead costs applied to jobs, $163,000(8) All of the jobs in process were completed.(9) All of the completed jobs were shipped to customers.(10) Any underapplied or overapplied overhead for the period was closed out to Cost of Goods Sold.Use the following T-accounts to answer the following question. The manufacturing overhead is:
A) $26,000 Underapplied
B) $4,000 Underapplied
C) $4,000 Overapplied
D) $26,000 Overapplied

Question

Leak Enterprises LLC recorded the following transactions for the just completed month. The company had no beginning inventories.(1) Raw materials purchased for cash, $96,000(2) Direct materials requisitioned for use in production, $69,000(3) Indirect materials requisitioned for use in production, $22,000(4) Direct labor wages incurred and paid, $129,000(5) Indirect labor wages incurred and paid, $16,000(6) Additional manufacturing overhead costs incurred and paid, $121,000(7) Manufacturing overhead costs applied to jobs, $163,000(8) All of the jobs in process were completed.(9) All of the completed jobs were shipped to customers.(10) Any underapplied or overapplied overhead for the period was closed out to Cost of Goods Sold.Use the following T-accounts to answer the following question.       The manufacturing overhead is:
A) $26,000 Underapplied 
B) $4,000 Underapplied 
C) $4,000 Overapplied 
D) $26,000 Overapplied

Quizplus · Accepted Answer

To calculate manufacturing overhead, we need to add up all the indirect costs incurred and divide it by the direct labor cost incurred. 
Indirect costs = Indirect materials + Indirect labor + Additional manufacturing overhead costs incurred and paid
Indirect costs = $22,000 + $16,000 + $121,000 = $159,000
Direct labor cost incurred = $129,000

Therefore, Manufacturing Overhead Rate (MOR) = $159,000/ $129,000 = 1.24 (rounded to two decimal places)

Manufacturing overhead costs applied to jobs = $163,000
Direct labor cost incurred for completed jobs = $129,000

Therefore, any overapplied or underapplied manufacturing overhead can be calculated as follows:
Applied Manufacturing Overhead - Actual Manufacturing Overhead
$163,000 - ($129,000 x 1.24) = $4,000 Overapplied

Therefore, the answer is C. $4,000 Overapplied.

Leak Enterprises LLC Recorded the Following Transactions for the Just