Problem 1 Compute the Predetermined Overhead Rate [LO3] Logan Products computes

Question

Problem 1 Compute the Predetermined Overhead Rate [LO3] Logan Products computes its predetermined overhead rate annually on the basis of direct labour hours. At the beginning of the year, it estimated that its total manufacturing overhead would be $588,000 and the total direct labour would be 42,000 hours. Its actual total manufacturing overhead for the year was $713,400 and its actual total direct labour was 41,000 hours. Required: Compute the company's predetermined overhead rate for the year, calculate the total overhead applied, and determine the amount of under-or over-applied overhead in the year.

Explanation / Answer

Predetermined overhead rate = 588000/42000= 14 Total overhead applied = 41000*14= 574000 Under-applied overhead = 713400-574000= 139400

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