Budget Data: Indirect labor and supplies $6,352,000 Factory rent $252,000 Insura

Question

Budget Data: Indirect labor and supplies $6,352,000 Factory rent $252,000 Insurance $26,000 Supervisor costs $707,500 Depreciation $1,062,500 Cost-allocation based for overhead Units produced Budgeted overhead application rate per unit $12.00 Other Info: Actual units - November 714,000 Actual overhead costs incurred (November) $7,950,000 Required: Compute the total budgeted units. What is the total applied overhead cost? What is the amount of the under- or over-applied overhead? How would the under- or over-applied overhead be treated on Goshen's November Financial Statements? Budget Data: Indirect labor and supplies $6,352,000 Factory rent $252,000 Insurance $26,000 Supervisor costs $707,500 Depreciation $1,062,500 Cost-allocation based for overhead Units produced Budgeted overhead application rate per unit $12.00 Other Info: Actual units - November 714,000 Actual overhead costs incurred (November) $7,950,000 Required: Compute the total budgeted units. What is the total applied overhead cost? What is the amount of the under- or over-applied overhead? How would the under- or over-applied overhead be treated on Goshen's November Financial Statements?

Explanation / Answer

Solution:

Total Budgeted overhead = $6,352,000 + $252,000 + $26,000 + $707,500 + $1,062,500 = $8,400,000

Budgeted overhead application rate per unit = $12 per unit

Budgeted units = $8,400,000 / 12 = 700000 units

Actual units = 714000

Applied overhead cost = 714000*12 = $8,568,000

Actual overhead cost = $7,950,000

Overapplied overhead cost = $8,568,000 - $7,950,000 = $618,000

Over applied overhead will be transferred to cost of goods sold at the nde of accounting period by debiting overhead account and crediting cost of goods sold account.

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