Question

Suresh Ltd. budgeted overhead at Rs. 2,55,000 for the period for Department A, based on a budgeted volume of 1,00,000 direct labour hours. At the end of the period, the Factory Overhead Control Account for Department A had a balance of Re. 2,70,000; actual direct labor hours were 1,05,000. What was the over- or underapplied overhead for the period?

• A. Rs. 2,250 overapplied
• B. Rs. 2,250 underapplied
• C. Rs. 15,000 overapplied
• D. Rs. 15,000 underapplied

Answer 1

The correct option is A Rs. 2,250 overapplied

Budgeted overheads Rs.255000 against the budgeted volume of 100000 direct labour hour.

Budgeted overhead per hour is =255000/100000

= Rs.2.55 per hour

Actual direct labour hour are 105000

Budgeted overheads on actual labour hours =Rs.2.55*105000

=Rs.267750

Factory Overhead control account balance =Rs.270000

Budgeted overheads on actual labour hours =Rs.267750

Overheads over applied = Rs.2250