Assume that the following predictions were made for 2014 for one of the plants o

Question

Assume that the following predictions were made for 2014 for one of the plants of Milliken & Company:

Total manufacturing overhead for the year $ 40,000,000

Total machine hours for the year 3,200,000

Actual results for February 2014 were as follows:

Manufacturing overhead $ 4,410,000

Machine hours 410,000

(a) Determine the 2014 predetermined overhead rate per machine hour. (Enter answer using two decimal places.)

(b) Using the predetermined overhead rate per machine hour, determine the manufacturing overhead applied to Work-in-Process during February.

(c) As of February 1, actual overhead was underapplied by $400,000. Determine the cumulative amount of any overapplied or underapplied overhead at the end of February

Explanation / Answer

a) Forecasted Manufacturing overhead for the year 40000000 Total machine hours for the year 3200000 12.5 Predetermined overhead rate = Budgeted manufacturing overhead/ total machine hours                                                               =40000000/3200000                                                               = 12.5 b) Actual machine hours in February 410000 predetermined overhead rate 12.5 Manufacturing overhead applied in February 5125000 715000 c) Overhead overapplied in February = 5125000 - 4410000                                                                         = 715000 overhead underapplied as on February 400000 overhead overapplied in February 715000 Commulatie overhead overapllied at end of February 315000 (715000 - 400000)

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