to jobs. The company has always used direct labor hours to mberjack Company is t
ID: 2329676 • Letter: T
Question
to jobs. The company has always used direct labor hours to mberjack Company is trying to decide on an allocation base to use to assign manufacturing overhead ssign manufacturing overhead to products, but t is trying to decide whether it should use a diff Actual and estimated data for manufacturing overhead, direct labor cost, direct labor hours, and machine hours for the most recent fiscal year are summarized here: Estimated ValueActual Value S 589,000 391,000 $ 650,000 $ 445,000 Manufacturing overhead cost Direct labor cost Direct labor hours Machine hours 16,000 hours 7,000 hours 17,500 hours 8,000 hours Required: 1. Based on the company's current allocation base (direct labor hours), compute the following: a. Predetermined overhead rate. (Round your answer to 2 decimal places.) etermined Overhead Rate per direct labor hour b. Applied manufacturing overhead. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount, nufacturing Overhead e. Over- or underapplied manufacturing overhead. ( amount.) Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar Overhead Overapplied byExplanation / Answer
SOLUTION
Requirement -1
A. Predetermined overhead rate = Estimated value of manufacturing overhead cost / Direct labor hours
= $589,000 / 16,000 hours = $36.81 per direct labor hour
B. Applied manufacturing overhead = Predetermined overhead rate * Actual units of cost driver
= $36.81 * 17,500 hours = $644,175
C. Overapplied or underapplied overhead = Applied overhead - Actual overhead
= $644,175 - $650,000 = $5,825
Overhead is underapplied by $5,825
Requirement -2
A. Predetermined overhead rate = Estimated value of manufacturing overhead cost / Estimated direct labor cost
= $589,000 / $391,000 = 1.50
B. Applied manufacturing overhead = Predetermined overhead rate * Actual units of cost driver
= 1.50 * 445,000 = $667,500
C. Overapplied or underapplied overhead = Applied overhead - Actual overhead
= $667,500 - $650,000 = $17,500
Overhead is overapplied by $17,500
Requirement -3
A. Predetermined overhead rate = Estimated value of manufacturing overhead cost / Estimated Machine hours
= $589,000 / 7,000 hours = $84.14 per machine hour
B. Applied manufacturing overhead = Predetermined overhead rate * Actual units of cost driver
= $84.14 * 8,000 = $673,120
C. Overapplied or underapplied overhead = Applied overhead - Actual overhead
= $673,120 - $650,000 = $23,120
Overhead is overapplied by $23,120
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