High Desert Potteryworks makes a variety of pottery products that it sells to retailers such as Home Depot. The company uses a job-order costing system in which predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor cost. At the beginning of the year, the company's management made the following estimates:
Job 205 was started on August 1 and completed on August 10. The company's cost records show the following information concerning the job:
(d) At the end of the year, the records of High Desert Potteryworks revealed the following actual cost and operating data for all jobs worked on during the year
What was the amount of underapplied or overapplied overhead in each department at the end of the year?

It is said that the painting department's manufacturing overhead costs total $750,000, that direct labour hours total 62,000 machine hours, and that the computed predefined overhead rate is $12.25 per direct labour hour. Direct worker hours and the predetermined overhead rate are multiplied to produce the manufacturing overhead applied.

As a result, the painting department applied a $759,500 production overhead. In this instance, the manufacturing overhead applied exceeds the manufacturing overhead expense incurred.

Therefore, the overapplied overhead for the painting departments is $9,500.

What is predefined overhead rate?

A predefined overhead rate is calculated at the start of the accounting period by dividing the anticipated manufacturing overhead by the anticipated activity base.
The predetermined overhead rate is consequently applied to production in order to make it simpler to compute a product's standard cost.

The underapplied and overapplied overhead of the department makes up the difference between manufacturing overhead cost incurred and manufacturing overhead applied.

Given that the moulding department's manufacturing overhead costs total $570,000, machine hours total 65,000, and a computed predefined overhead rate of $8.60 per machine hour. Multiplying the machine hours by the predetermined overhead rate yields the manufacturing overhead imposed.

Consequently, the moulding department applied a $559,000 production overhead. In this case, production overhead imposed exceeds manufacturing overhead incurred. Therefore, the underapplied overhead for the moulding departments is $11,000.

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