PNG Corporation designs and builds roller coasters for amusement parks. At the e
ID: 2475641 • Letter: P
Question
PNG Corporation designs and builds roller coasters for amusement parks. At the end of 20x1, managers estimated overhead costs for 20x2 of $150,000 based on expected production of 5 roller coasters (5 jobs) using 5,000 labor hours each. Actual overhead costs for 20x2 were $170,000. PNG actually designed and built 6 roller coasters (6 jobs) with the following direct labor usage and overhead costs: Actual Overhead Cost actual Labor Hours The Big Dipper (job 1) $28,000 3,500 The Ultimate Scream (job 2) 35,000 4,000 Loop Me (job 3) 27,000 5,000 The Screaming Chicken (job 4) 40,000 2,500 You Don’t Know Coasters (job 5) 25,000 6,000 Old Faithful (job 6) 15,000 4,500 Assume PNG uses a normal costing system with the number of labor hours as the overhead allocation base. a. Calculate the allocation rate for 20x2. b. Calculate the total corporate over- or underapplied overhead (specify which) for 20x2.
Explanation / Answer
Details Amt $ Estimated Overhead 20X2= 150,000 Estimated Direct Labor Hrs for 5 jobs @5000 labor hours= 25,000 Overhead Rate per Direct Labor Hour=150000/25000= $ 6.00 a So Allocation Rate per Labor hour in 20X2= $ 6.00 b Overhead Over-Uder applied calculation Job No Actual Overhead Actual Labor Hours Overhead Applied @$6 per hour Job 1 28,000 3,500 21,000 Job 2 35,000 4,000 24,000 Job 3 27,000 5,000 30,000 Job 4 40,000 2,500 15,000 Job 5 25,000 6,000 36,000 Job 6 15,000 4,500 27,000 Total 170,000 153,000 Total Overhead Incurred in 20X2 170,000 Total Overhead Applied in 20X2 153,000 Overhead Underapplied = 17,000
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