Question: Eaker Company uses activity-based costing to compute product costs for external reports. The company has three activity centers and applies overhead using predetermined overhead rates for each activity center. Estimated costs and activities for the current year are presented below for the three activity centers:
Estimated
Overhead Expected
Cost Activity
Batch setups $20,400 1,200
Material handling $52,800 2,400
General Factory $78,000 2,600
Actual costs and activities for the current year were as follows:
Estimated
Overhead Expected
Cost Activity
Batch setups $20,740 1,230
Material handling $52,360 2,470
General Factory $77,590 2,680
Required:
(a.) How much total overhead was applied to products during the year?
(b.) By how much was overhead overapplied or underapplied? (Be sure to clearly label your answer as to whether the overhead was overapplied or underapplied.)