Tria Totes produces back packs and fanny packs for the outdoors enthusiast. Prod

Question

Tria Totes produces back packs and fanny packs for the outdoors enthusiast. Production costs include direct materials, direct labotr, and manufacturing overhead- both fixed and variable. The following costs were budgeted for the year:

The back packs are expected to require 2.5 direct labor hours and planned production is 12,000 units. The fanny packs are expected to require 1.8 direct labor hours and planned production is 18,000 units.

The actual direct labor hours required in production for the year were:

Overhead is applied to production using direct labor hours and the actual manufacturing cost for the year was 270,500.

a) Calculate the manufacturing overhead rate used to apply overhead to production of both the back packs and the fanny packs. What is the resulting over-or-under absorbed overhead for the year?

b) Explain what the over-or-under absorbed ooverhead represents and how it will be handeled in the determination of the final costs of the products.

fixed manufacturing overhead 187,200 variable manufacturing overhead 1.10 per direct labor hour fixed selling and administrative 375,000

Explanation / Answer

Answer: 1

Answer: 2

Expected Direct Labour Hours Back Pack Fanny Pack Total Direct Labour Hour Per Unit 2.5 1.8 Planned Production 12000 18000 Total Direct Labour Hours required 30000 32400 62400 Fixed Manufacturing Overhead 187200 Total Direct Labour Hours required 62400 Overhead Rate: 187200/62400 3 Back Pack Fanny Pack Total Applied Overhead Rate Per Hour 3 3 3 Actual Direct Labour Hours Used 34060 16250 50310 Applied Manufacturing Overhead 102180 48750 150930 Applied Manufacturing Overhead 150930 Less: Actual Manufacturing Overhead -270500 Over(Under) Applied Manufacturing Overhead -119570

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