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During 2017, Oriole Company expected Job no. 59 to cost $300000 of overhead, $560000 of materials, and $200000 in labor. Oriole applied overhead based on direct labor cost. Actual production required an overhead cost of $255000, $630000 in materials used, and $280000 in labor. All of the goods were completed. How much is the amount of over- or underapplied overhead

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Answer:

$165,000

Explanation:

The computation of the amount of over- or underapplied overhead is shown below:

The Predetermined overhead rate is

= Predetermined overhead ÷ direct labor cost

= ($300,000 ÷ $200,000)

= 150% of direct labour cost

Now  

overhead applied is

= (150% × $280,000)

= $420,000

And,  

Actual overhead=$255,000

So,  

overhead overapplied is

= $420,000 - $255,000

= $165,000

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