Luzadis Company makes furniture using the latest automated technology. The compa

Question

Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year:

  
  Machine-hours 81,000
  Fixed manufacturing overhead cost $ 1,272,000
  Variable manufacturing overhead per computer-hour $ 3.20

    During the year, a glut of furniture on the market resulted in cutting back production and a buildup of furniture in the company’s warehouse. The company’s cost records revealed the following actual cost and operating data for the year:

  
  Machine-hours 50,000
  Manufacturing overhead cost $ 1,021,000
  Inventories at year-end:
     Raw materials $ 440,000
     Work in process (includes overhead applied of 37,800) $ 110,000
     Finished goods (includes overhead applied of 264,600) $ 1,030,000
  Cost of goods sold (includes overhead applied of 642,600) $ 2,770,000

Required:

1.

Compute the company’s predetermined overhead rate for the year. (Round your answer to 2 decimal places.)

2.

Compute the underapplied or overapplied overhead for the year. (Round your intermediate calculations to 2 decimal places.)

what is the best way to solve this problem?

Explanation / Answer

1 ) calculation of predermind overhead rate

PREDERMINED OVERHEAD RATE =

ESTIMATED MANUFACTURING OVERHEAD COST / ESTIMATED TOTAL UNITS IN ALLOCATION BASE

SO by using this formula = 1272000 / 81000 =15.70 + 3.20 (variable ) = 18.90 ans

2 )

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.