Randall Company manufactures products to customer specifications. A job costing system is used to accumulate production costs. Factory overhead cost was applied at 125% of direct labor cost. Selected data concerning the past year's operation of the company are presented below. January 1 December 31 Direct materials $ 84,000 $ 47,000 Work in process 73,000 49,000 Finished goods 122,000 107,000 Other information Direct materials purchases $ 331,000 Cost of goods available for sale 964,000 Actual factory overhead costs 267,000 The amount of underapplied or overapplied overhead is:.

Solution :

The cost of the manufactured goods = cost of the available goods for sale - beginning of finished goods

                                                     = 964,000 - 122,000

                                                     = $ 842,000

Total cost of manufacturing = cost of the goods manufactured + ending work in process - beginning work in process

                                           =  842,000 + 49,000 - 73,000

                                          = $ 818,000

The direct material used = 84,000 + 331,000 - 47,000

                                       = $ 368,000

Now, the direct materials used + direct labor cost + factory overhead applied = the total material cost

368,000 + direct labor cost + 125% of direct labor = 818,000

225% of the direct labor cost = 818,000 - 368,000

                                              = $ 450,000

Direct labor = %   = $ 200,000

Therefore the factory overhead applied =  200,000 x 125%

                                                              =

The underapplied overhead =

                                           =

                                           = $ 10,000

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