Question

MULTIPLE CHOICE: Circle the answer of the best response.

1) A Lot of Wine Company listed the following data for the current year:

Budgeted factory overhead	$1,184,000
Budgeted direct labor hours	69,600
Budgeted machine hours	24,500
Actual factory overhead	1,157,400
Actual labor hours	72,600
Actual machine hours	23,900

If overhead is applied based on direct labor hours, the overapplied/underapplied overhead is over or under applied and by how much? ________________________________________:

Please use this information to answer questions 2, 3 & 4:

Assume the following information for SABRES Company:

Prime Costs	$485,000
Conversion Costs	575,000
Direct Materials Used	105,000
Beginning Work In Process	198,000
Ending Work In Process	81,000

2) Direct Labor used is calculated to be: $ ____________________________

3) Factory Overhead is calculated to be: $ ___________________________

4) Total all-in manufacturing cost for the period is calculated to be: $ _____________________

Answer 1

1.

Budgeted factory overhead = $1,184,000

Budgeted direct labor hours = 69,600

Predetermined overhead rate = Budgeted factory overhead /Budgeted direct labor hours

= 1,184,000/69,600

= $17.0114943 per direct labor hour

Overhead applied = Actual labor hours x Predetermined overhead rate

= 72,600 x 17.0114943

= $1,235,034

Actual factory over head = $1,157,400

Over applied overhead = Overhead applied - Actual factory overhead

= 1,235,034-1,157,400

= $77,634

2.

Prime cost = Direct materials + Direct labor

485,000 = 105,000+ Direct labor

Direct labor = $380,000

Direct Labor used is calculated to be: $ 380,000

3.

Conversion costs = Direct labor + Factory overhead

575,000 = 380,000+ Factory overhead

Factory overhead = $195,000

Factory Overhead is calculated to be: $195,000

4.

Manufacturing cost = Direct materials + Direct labor + Factory overhead

= 105,000+380,000+195,000

= $680,000

Total all-in manufacturing cost for the period is calculated to be: $ 680,000