Gonzales, Inc. manufactures stereo speakers in two factories; one in Vandalia, I

Question

Gonzales, Inc. manufactures stereo speakers in two factories; one in Vandalia, Illinois and another in Merced, california. The Vandalia factory uses direct labor hours (DLHs) for its overhead rate and the Modesto factory uses machine-hours (MHs) for its overhead rate. Information related to both plants for last year is presented below:

Vandalia factory

Modesto factory

Estimated manufacturing overhead

$2,600,000

$3,000,000

Estimated amount of allocation base

(a)

150,000 MHs

Predetermined overhead rate

$40 per DLH

(d)

Actual amount of allocation base

(b)

185,000MHs

Actual manufacturing overhead

$2,900,000

$3,450,000

Applied manufacturing overhead

$2,840,000

(e)

Under or overapplied overhead (indicate the   dollar amount and whether it is over or underapplied)

(c)

(f)

Required: fill in the lettered blanks above. Show your calculations.

  

     

Vandalia factory

     

Modesto factory

     

Estimated manufacturing overhead

     

$2,600,000

     

$3,000,000

     

Estimated amount of allocation base

     

(a)

     

150,000 MHs

     

Predetermined overhead rate

     

$40 per DLH

     

(d)

     

Actual amount of allocation base

     

(b)

     

185,000MHs

     

Actual manufacturing overhead

     

$2,900,000

     

$3,450,000

     

Applied manufacturing overhead

     

$2,840,000

     

(e)

     

Under or overapplied overhead (indicate the   dollar amount and whether it is over or underapplied)

     

(c)

     

(f)

  

Explanation / Answer

Hi,

Please find the detailed answer as follows:

Part A:

Estimated amount of allocation base = Estimated manufacturing overhead/Predetermined overhead rate = 2600000/40 = 65000 Direct Labor Hours

Part B:

Actual amount of allocation base = Applied manufacturing overhead/Predetermined overhead rate = 2840000/40 = 71000 Direct Labor Hours

Part C:

Underapplied by $60000 (2900000 - 2840000).

Part D:

Predetermined overhead rate = Estimated manufacturing overhead/Estimated amount of allocation base = 3000000/150000 = $20 per Machine Hour

Part E:

Applied Manufacturing Overhead = Actual Machiner Hours*Predetermined overhead rate = 185000*20 = $3700000

Part F:

Overapplied by $250000 (3700000 - 3450000)

Thanks.

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