Privack Corporation has a standard cost system in which it applies overhead to p

Question

Privack Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below Budgeted variable overhead cost per direct labor-hour Total budgeted fixed overhead cost per year Budgeted direct labor-hours (denominator level of activity) Actual direct labor-hours Standard direct labor-hours allowed for the actual output $4.00 $592,856 59,286 86,000 80,000 Required 1. Compute the predetermined overhead rate for the year. Be sure to include the total budgeted fixed overhead and the total budgeted variable overhead in the numerator of your rate. (Round your answer to the nearest whole dollar amount.) 2. Compute the amount of overhead that would be applied to the output of the period. (Round your intermediate calculations and final answer to the nearest whole dollar amount.) 1. Predetermined overhead rate 2. Overhead applied per DLH

Explanation / Answer

Answer 1.

Budgeted Variable Overhead Cost per DLH = $4

Budgeted Fixed Overhead Cost = $592,856
Budgeted DLH = 59,286

Budgeted Fixed Overhead Cost per DLH = Budgeted Fixed Overhead Cost / Budgeted DLH
Budgeted Fixed Overhead Cost per DLH = $592,856 / 59,286
Budgeted Fixed Overhead Cost per DLH = $10

Predetermined Overhead Rate = Budgeted Variable Overhead Cost per DLH + Budgeted Fixed Overhead Cost per DLH
Predetermined Overhead Rate = $4 + $10
Predetermined Overhead Rate = $14 per DLH

Answer 2.

Predetermined Overhead Rate = $14 per DLH
Actual DLH = 86,000

Overhead Applied = Predetermined Overhead Rate * Actual DLH
Overhead Applied = $14 * 86,000
Overhead Applied = $1,204,000

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