Computing underappiied and overappiied overhead Perez Manufacturing Company has been using direct labor hours as its application base for applying overhead to products. The newly hired chief accountant suggested recently that it would require less clerical work if the company would use direct labor cost as its application base. Budgeted overhead cost for 1992 was $800,000 and budgeted direct labor hours were 80,000. Budgeted direct labor cost was $960,000. The balance in the Manufacturing Overhead Control account at the end of 1992 was $911,460. Actual direct labor hours worked were 89,300 and actual direct labor cost was $1,194,500.

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REQUIRED a. Using direct labor hours as the overhead application base, calculate the manufacturing over- head rate, the amount of overhead applied in 1992, and the underapplied or overapplied overhead for the year. b. Using direct labor cost as the overhead application base, compute the manufacturing overhead rate, the overhead applied for 1992, and the underapplied or overapplied overhead for the year.