In: Accounting
Predetermined Departmental Overhead Rates, Applying Overhead to Production
At the beginning of the year, Hallett Company estimated the following:
Cutting Department | Sewing Department | Total | |||
Overhead | $240,000 | $350,000 | $590,000 | ||
Direct labor hours | 31,200 | 99,900 | 131,100 | ||
Machine hours | 150,000 | — | 150,000 |
Hallett uses departmental overhead rates. In the cutting department, overhead is applied on the basis of machine hours. In the sewing department, overhead is applied on the basis of direct labor hours. Actual data for the month of June are as follows:
Cutting Department | Sewing Department | Total | |||
Overhead | $20,610 | $35,750 | $56,360 | ||
Direct labor hours | 2,800 | 8,600 | 11,400 | ||
Machine hours | 13,640 | — | 13,640 |
Required:
1. Calculate the predetermined overhead rates for the cutting and sewing departments. Round your answers to the nearest cent.
Cutting department | $ per machine hour |
Sewing department | $ per direct labor hour |
2. Calculate the overhead applied to production in each department for the month of June. Use overhead application rates that are rounded to the nearest cent in your calculations, and round your final answers to the nearest dollar.
Cutting department | $ |
Sewing department | $ |
3. By how much has each department's overhead been overapplied or underapplied?
Cutting department | $ |
Sewing department | $ |
1. Computation of Predetermined Overhead Rate | ||
Particular | Cutting Department | Sewing Department |
Overhead Cost (A) | $240,000.00 | $350,000.00 |
Direct Labor Hours (B) | 99900 | |
Machine Hours (B) | 150000 | |
Predetermined Overhead Rate (A/B) | $1.60 | $3.50 |
2. Computation of Overhead Assigned to product. | ||
Cutting Department | Sewing Department | |
Driver (a) | 13640 Machine Hour | 8600 DLH |
Predetermined Overhead Rate (as Calculated above) (b) | $1.60 per MH | $3.50 per DLH |
Applied Overhead cost (aXb) | $21,824.00 | $30,100.00 |
3. Computation of Oveerhead under Applied or overapplied | ||
Cutting Department | Sewing Department | |
Applied Overhead | $21,824.00 | $30,100.00 |
Actual Overhead | $20,610.00 | $35,750.00 |
Under Applied | $5,650.00 | |
Overapplied | $1,214.00 |