At the beginning of the year Grey Corperation estimated the following: Grey uses

Question

At the beginning of the year Grey Corperation estimated the following:

Grey uses departmental overhead rates. In the assembly department, overhead is applied on direct labor hours. In the packaging department overhead is applied on the basis of machine hours. Actual data for the motnth of April are as follows:

A. Calculate the predetermined overhead rate for the assembly and packaging departments.

B. Calculate the overhead applied to production in each department for the month of April.

C. Calculate how much each department's overhead is overapplied/underapplied.

Assembly Department Packaging Department Overhead $ 840,000 $210,000 Direct Labor hours $ 80,000 $4,000 Machine Hours $ 20,000 $ 12,000

Explanation / Answer

A. Predetermined overhead rates

Assembly = 840000/80000

= 10.50

Packaging = 210000/12000

= 17.50

B. Overheads applied

Assembly = 10.50 x 4000 = 42000

Packaging = 1200 x 17.50 = 21000

C. Underapplied overhead in assembly = 42759 - 42000 = 759

   Over applied overhead in packaging = 21000 - 20400 = 600

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