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Answer:
The amount of $5,700 represents under applied overhead.
Explanation:
The computation of the amount of the under applied and over applied manufacturing overhead is shown below:
= Applied overhead - actual overhead
where,
Applied overhead equals to
= Actual level of direct labor hours × overhead rate per direct labor-hour
= 11,500 direct labor hours × $18.20
= $209,300
And, the actual overhead is $215,000
Now put these values to the above formula
So, the answer would be equal to
= $209,300 - $215,000
= - 5,700
So, the negative amount represents under applied overhead of $5,700
The correct statement is that the under applied overheads for Osborn Manufacturing Company is calculates as a negative balance of $5700 at the overhead rate of $18.20.
The calculation of the overhead costs is done by using the formula for under applied overheads and calculating the required values from such given information.
Calculation of manufacturing overheads
The formula for the calculation of manufacturing overheads whether under applied or over applied can be determined is as below,
[tex]\rm Under-applied\ Overheads= Applied\ Overheads- Actual\ Overheads[/tex]
However, to calculate further the actual overheads can be calculated as below by applying the given values to the formula,
[tex]\rm Applied\ Overheads= Actual\ Level\ of\ Direct\ Labor\ Hours\ x\ Overhead\ Rate\ per\ Direct\ Labor\ hour\\\\\rm Applied\ Overheads= 11500\ x\ 18.20\\\\\rm Applied\ Overheads= \$209300[/tex]
Now applying the values to the formula, we get,
[tex]\rm Under-applied\ Overheads= 209300- 215000\\\\\rm Under-applied\ Overheads= - \$5700[/tex]
So, the under-applied manufacturing overheads are calculated as -$5,700.
Hence, the correct statement is that under applied overheads for Osborn Manufacturing Company is calculated as a negative balance of $5700 at the overhead rate of $18.20.
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