1. The assembly department had beginning work in process of 18,000 units, ending

Question

1. The assembly department had beginning work in process of 18,000 units, ending work in process of 22,000 units, and units transferred out of 58,000 units. What was the number of units started or transferred in?

2. Cabot Corp. is a job lot manufacturer. The budget for the month of May calls for 7,000 direct labor hours to be worked. Budgeted overhead is $84,000 with a predetermined rate of $12 per hour. Overhead is applied based on actual direct hours worked. Actual direct hours were 7,200 and actual overhead spending was $83,000. What was the under applied or over applied overhead for the month of May? Over applied is shown as a negative number.

Explanation / Answer

1.Units Started or Transferred In = (Units Transferred Out - Opening WIP) + Closing WIP

= (58000 - 18000) + 22000

= 62000

2. Budget

Direct Labour Hours = 7000

Labour Overheads = $ 84000

Predetermined Rate = $ 12

Actual

Direct Labour Hours = 7200

Actual Overheads = $ 83000

Applied Overheads = (7200 * 12) = $ 86400

Applied Overheads > Actual Overheads

Therefore , it is a case of overapplied overhead

Overapplied Overhead = Applied OH - Actual OH

= 86400 - 83000

= - 3400

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