Samli Company estimates that annual manufacturing overhead costs will be $600,000. Estimated annual operating activity bases are: direct labor cost $460,000, direct labor hours 40,000 and machine hours 80,000. The actual manufacturing overhead cost for the year was $602,000 and the actual direct labor cost for the year was $456,000. Actual direct labor hours totaled 40,200 and machine hours totaled 79,000. Samli applies overhead based on direct labor hours. Compute the predetermined overhead rate and determine the amount of manufacturing overhead applied. Determine if overhead is over or underapplied and the amount.

Predetermined overhead rate = overhead cost / direct labor hours =$600000/40000= $15.

Applied overhead rate = Predetermined overhead rate * Direct labor hours total = $15 * 40200= $603000

over applied = applied overhead rate - actual overhead cost = 603000- 602000=1000

overhead applied is over applied