Question 1 Manufacturing Overhead 9 marks

Bahubali Ltd allocates manufacturing overhead to work in process based on direct labour hours. On 1st January of the current year, there were no balance in work in process of finished goods inventories. The following estimates were included in the budget for the current year:

Total projected manufacturing overhead $300,000

Total projected direct labour hours 40,000

During January, the firm worked on the following production jobs:

Kattapa J: 1,600 direct labour hours

Devsena X: 2,400 direct labour hours

Sivagami K: 1,000 direct labour hours

Actual overhead incurred by Bahubali Ltd amounted to $30,000.

Required:

1. Calculate the companys predetermined overhead rate for the year. (2 mark)

2. How much manufacturing overhead was applied to production? (3 marks)

3. Calculate and journalize the overapplied or underapplied overhead (4 marks)