Compute the company's predetermined overhead rate for the year, calculate the total overhead applied, and determine the amount of under or over applied overhead in the year.

Logan Products computes its predetermined overhead rate annually on the basis of machine-hours. At the beginning of the year, it estimated that its total manufacturing overhead would be $348,000 and machines would be run a total of 20,000 hours. Its actual total manufacturing overhead for the year was $336,400 and its actual total machine-hours was 19,500 hours.

Required:

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Expert Solution

The predetermined overhead rate is computed as follows:

Estimated total manufacturing overhead..........................................$348,000

Divided by: Estimated total direct labour hours (DLHs)..................20,000 MHs

Predetermined overhead rate..................................................................$17.40 per MH

Actual Overhead = $336,400

Overhead Applied = (19,500 × $17.40) $339,300

Therefore, overhead is over-applied by $2,900.

Predetermined overhead rate = $17.40 per MH

Overhead Applied = $339,300

Over-applied = $2,900

Renze Joy Candido answered 1 year ago

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