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Jackson Company applies overhead to products using direct labor cost as the activity level. During
2008, Jackson Company had the following estimated costs:
Direct materials ……………….. $243,000
Direct labor …………………… 200,000
Advertising expense …………….. 35,000
Rent on factory building ………… 36,000
Depreciation ……………….. … 60,000
Indirect materials ……………… 20,000
Sales commissions ………………. 50,000
Production supervisor’s salary …… 40,000
Insurance on sales equipment …….. 17,000
It is known that 70% of the depreciation relates to equipment in the factory while 30% of the
depreciation relates to equipment in the administrative offices.
Jackson Company’s accounting records indicated the following actual costs had been incurred
during 2008:
Direct materials purchased ……….. $237,000
Direct labor ……………………. 220,000
Total overhead cost ……………… 125,000
Total selling & administrative costs . 130,000
Calculate the amount that Jackson Company’s overhead was over-applied by in 2008. Do not use