Question

Suit Up produces uniforms. The company allocates manufacturing overhead based on the machine hours each job uses. Suit Up reports the following cost data for the past​ year:

Requirements

1. Compute the predetermined manufacturing overhead rate.

2. Calculate the allocated manufacturing overhead for the past year.

3. Compute the underallocated or overallocated manufacturing overhead. How will this underallocated or overallocated manufacturing overhead be disposed​ of?

4. How can managers use accounting information to help control manufacturing overhead​ costs?

Budget Actual

Direct labor hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,100 hours 6,100 hours

Machine hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,400 hours 6,400 hours

Depreciation on salespeople's autos . . . . . . . . . . . . . . . .$22,000 $22,000

Indirect materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,000 $50,500

Depreciation on trucks used to deliver uniforms to customers . . . . . . . . . . . . . . . . . . . . . . . $13,500 $11,500

Depreciation on plant and equipment . . . . . . . . . . . $70,000 $71,500

Indirect manufacturing labor . . . . . . . . . . . . . . . . . . . . $42,000 $45,000

Customer service hotline . . . . . . . . . . . . . . . . . . . . . . $19,500 $21,500

Plant utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,200 $21,200

Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $71,000 $85,000

Budget Actual Direct labor hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,100 hours 6,100 hours

Machine hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,400 hours 6,400 hours

Depreciation on salespeople's autos . . . . . . . . . . . $22,000 $22,000

Indirect materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,000 $50,500

Depreciation on trucks used to deliver uniforms to customers . . . . . . . . . . . . . . . . . . . . . . . $13,500 $11,500

Depreciation on plant and equipment . . . . . . . . . . . $70,000 $71,500

Indirect manufacturing labor . . . . . . . . . . . . . . . . . . . . $42,000 $45,000

Customer service hotline . . . . . . . . . . . . . . . . . . . . . . $19,500 $21,500

Plant utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,200 $21,200

Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $71,000 $85,000

Answer 1

Following costs are not part of manufacturing cost.
Depreciation on salespeople's autos
Depreciation on trucks used to deliver uniforms to customers
Customer service hotline
Budget Manufacture cost
Indirect materials	$        48,000
Depreciation on plant and equipment	$        70,000
Indirect manufacturing labor	$        42,000
Plant utilities	$        19,200
Budget Manufacture cost		$        179,200
Divided by: Budgeted Machine hours		6,400
Predetermined manufacturing overhead rate		$                  28
Predetermined manufacturing overhead rate		$                  28
Multiply: Actual Machine hours		6,400
Allocated manufacturing overhead for the past year		$        179,200
Actual Manufacture cost
Indirect materials	$        50,500
Depreciation on plant and equipment	$        71,500
Indirect manufacturing labor	$        45,000
Plant utilities	$        21,200
Actual Manufacture cost		$        188,200
Less: Allocated manufacturing overhead		$        179,200
Under-allocated (Overallocated) manufacturing overhead		$            9,000
Underallocated manufacturing overhead		$            9,000
Underallocated manufacturing overhead will be added to cost of goods sold.
General Journal	Debit	Credit
Cost of goods sold	9,000
Manufacture overhead		9,000
(To record under applied of manufacture overhead.)
(ANswer4 ) Manager should compare the actual amount with budgeted amounts line by line. If any large variance then investigates this cost line and identify the reason behind actual cost differ from budgeted data.