Creative Lighting, Inc., makes specialty table lamps. Manufacturing overhead is applied to production on a direct labor hours basis. During June, the first month of the company's fiscal year, $56,520 of manufacturing overhead was applied to Work in Process Inventory using the predetermined overhead application rate of $6 per direct labor hour.
Required:
a. Calculate the number of hours of direct labor used during June.
b. Actual manufacturing overhead costs incurred during June totaled $49,340.
Calculate the amount of over or under applied overhead for June.
c. Identify two possible explanations for the over or under applied overhead.
d. Explain the accounting appropriate for the over or under applied overhead at the end of June.