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Fine & Associates is an interior decorating firm in Tucson. The following costs were incurred in a project to redecorate the mayor's offices:
Direct material
$ 29,000
Direct professional labor
42,000
The firm's budget for the year included the following estimates:
Budgeted overhead
$800,000
Budgeted direct professional labor
640,000
Overhead is applied to contracts by using a predetermined overhead rate that is based on direct professional labor cost. Actual professional labor during the year was $655,000 and actual overhead was $793,000.
Required:
A. Determine the total cost to redecorate the mayor's offices.
B. Calculate the under- or overapplied overhead for the year. Be sure to label your answer.
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