Determine the amount of over- or under-applied overhead

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Reference no: EM1314581

Overhead Variances

The following calendar year information about the Acme Corporation is available on December 31:

Advertising expense	$28,800
Depreciation of factory equipment	43,320
Depreciation of office equipment	10,800
Direct labor	142,600
Factory utilities	35,650
Interest expense	6,650
Inventories, January 1:
Raw materials	3,450
Goods in process	17,250
Finished goods	35,650
Inventories, December 31:
Raw materials	2,300
Goods in process	20,700
Finished goods	31,050
Raw materials purchases	132,450
Rent on factory building	41,400
Indirect labor	51,750
Sales commissions	16,500

The company applies overhead on the basis of 125% of direct labor costs.

a. Calculate the amount of over- or under-applied overhead.

b. What is the significance of this over- or under-applied amount of overhead?

Reference no: EM1314581

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