The following information is available for Lock-Safe Company, which produces special-order security products and uses a job order cost accounting system.

The following information is available for Lock-Safe Company, which produces special-order security products and uses a job order cost accounting system.

   

	April 30		May 31
Inventories
Raw materials	$	42,000	$	49,000
Goods in process		10,400		18,500
Finished goods		65,000		33,000
Activities and information for May
Raw materials purchases (paid with cash)				187,000
Factory payroll (paid with cash)				400,000
Factory overhead
Indirect materials				12,000
Indirect labor				79,000
Other overhead costs				103,500
Sales (received in cash)				1,260,000
Predetermined overhead rate based on direct labor cost				50	%

  
Determine whether there is over or underapplied overhead using T-accounts.

 

Explanation:

Cost of direct labor used
Total factory payroll	$	400,000
Less indirect labor		(79,000)
Cost of direct labor used	$	321,000

  

Factory overhead: $321,000 × 50% = $160,500.

   

Indirect materials	$	12,000
Indirect labor		79,000
Other overhead costs		103,500
Total actual overhead incurred		194,500
Overhead applied		160,500
Overapplied overhead	$	34,000