Treatment of over- or underapplied overhead Caspar Company estimates that its overhead costs for 2007 will be

Question:

Treatment of over- or underapplied overhead Caspar Company estimates that its overhead costs for 2007 will be $450,000 and output in units of product will be 300,000 units.

Required

a. Calculate Caspar’s predetermined overhead rate based on expected production.

b. If 24,000 units of product were made in March 2007, how much overhead cost would be allocated to the Work in Process Inventory account during the month?

c. If actual overhead costs in March were $35,000, would overhead be overapplied or underapplied and by how much?

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