Problem

Factory overhead rate and application. Faye Company produces electric hairdryers. Because variable overhead expense is closely related to hours worked, the company uses the direct labor hours method of applying factory overhead. The following data pertain to a recent accounting period:

Required: Determine the following:

(1) The predetermined factory overhead rate.

(2) The applied factory overhead.

(3) The over- or underapplied factory overhead.

Step-by-step solution

Per hour labor cost Factory overhead. Labor hours... Estimated$10.00$67,50015,000Actual$9.75$69,00016,000