Question

ALF’s Pet Supply Manufacturing produces a variety of pet products. ALF’s accounting records for 2016 contain the following information:

	Budgeted	Actual
Manufacturing overhead costs	$250,000	$220,000
Direct labor hours	20,000	22,000
Direct material costs	$500,000	$520,000

Two of the products that ALF’s produces are food bowls and chew toys. At the start of 2016, food bowl manufacturing was expected to use 5,000 direct labor hours and chew toy manufacturing was expected to use 10,000 direct labor hours during the year. Actual usage during 2016 was 4,000 direct labor hours for food bowl manufacturing and 12,000 direct labor hours for chew toy manufacturing.

ALF’s uses normal costing and allocates overhead costs using direct labor hours.

a. The 2016 predetermined overhead allocation rate is:

b. The amount of manufacturing overhead costs allocated to food bowl production during 2016 is:

c. The amount of manufacturing overhead costs allocated to chew toy production during 2016 is:

d. Manufacturing overhead costs during 2016 have been:

CHOOSE ONE:             OVERAPPLIED             UNDERAPPLIED                       NEITHER

e. If ALF’s instead allocated overhead costs using direct material costs rather than direct labor hours, the total amount of manufacturing overhead costs allocated during 2016 would have been:

CHOOSE ONE:             HIGHER           LOWER            THE SAME       NOT ENOUGH INFORMATION

Answer 1