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In: Accounting

The Lynn Company uses a normal job-costing system at its Minneapolis plant. The plant has a...

The Lynn Company uses a normal job-costing system at its Minneapolis plant. The plant has a machining department and an assembly department. Its job-costing system has two direct-cost categories (direct materials and direct manufacturing labor) and two manufacturing overhead cost pools (the machining department overhead, allocated to jobs based on actual machine hours, and the assembly department overhead, allocated to jobs based on actual direct manufacturing labor costs). The 2014 budget for the plant is as follows:

	Machining Department	Assembly Department
Manufacturing overhead	$1,800,000	$3,600,000
Direct manufacturing labor costs	$1,400,000	$2,000,000
Direct manufacturing labor hours	100,000	200,000
Machine-hours	50,000	200,000

During February the job cost record for Job 494 contained the following:

	Machining Department	Assembly Department
Direct materials used	$45,000	$70,000
Direct manufacturing labor costs	$14,000	$15,000
Direct manufacturing labor hours	1,000	1,500
Machine-hours	2,000	1,000

At the end of 2014 the actual manufacturing overhead costs were $2,100,000 in machining. Assume that 55,000 actual machine hours were used in machining.

Calculate the machining department overhead allocation rate and present your answer as $/allocation base State whether the overhead for the machining department is overallocated or underallocated

You must use the full word either underallocated or overallocated in your answer.

Expert Solution

Answer:

Machining department overhead allocation rate

= Budgeted Manufacturing Overheads of Machining department / Budgeted Machine hours

= $1,800,000 / 50,000 hours

= $36 per Machine hour

Actual Machine hours used = 55,000 hours

Machining department overhead allocated = Machining department allocation rate * Actual Machine hours

= $36 per Machine hour * 55,000 hours

= $1,980,000

Actual manufacturing overhead costs = $2,100,000

So,the manufacturing overhead for machining department are Under-allocated = $120,000

ekkarill92 answered 2 years ago

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