In: Accounting
Verizox Company uses a job order cost system with manufacturing overhead applied to products based on direct labor hours. At the beginning of the most recent year, the company estimated its manufacturing overhead cost at $172,980. Estimated direct labor cost was $435,240 for 18,600 hours.
Actual costs for the most recent month are summarized
here:
Item Description | Total Cost | |
Direct labor (1,860 hours) | $ | 43,525 |
Indirect costs | ||
Indirect labor | 2,430 | |
Indirect materials | 3,380 | |
Factory rent | 3,240 | |
Factory supervision | 4,810 | |
Factory depreciation | 5,640 | |
Factory janitorial work | 1,150 | |
Factory insurance | 1,830 | |
General and administrative salaries | 4,250 | |
Selling expenses | 5,380 | |
Required:
1. Calculate the predetermined overhead rate.
(Round your answer to 2 decimal places.)
2. Calculate the amount of applied manufacturing
overhead.
3. Calculate actual manufacturing overhead
costs.
4. Compute over- or underapplied overhead.
(Input the amount as positive value.)
1. Computation of predetermined overhead rate
predetermined overhead rate = Estimated Manufacturing OH / Estimated Hours
predetermined overhead rate = $172980 / 18600
Predetermined overhead rate = $9.30 pere hour
2. Computation of the amount of applied manufacturing overhead.
Applied manufacturing overhead.= Actual Hours Worked * Pre determined OH Rate
Applied manufacturing overhead.= $17298
3. Computation of actual manufacturing overhead costs.
Actual manufacturing overhead costs = Total Indirect Costs + Factory Costs
Actual manufacturing overhead costs = $2430 + $3380 + $3240 + $4810 + $5640 + $1150 + $1830
Actual manufacturing overhead costs = $22480
4. Computation of over- or underapplied overhead
Actual manufacturing overhead costs = $22480
Applied manufacturing overhead.= $17298
As Actual manufacturing overhead costs > Applied manufacturing overhead, the OH results in Under applied
Underapplied Overheads = Actual manufacturing overhead costs - Applied manufacturing overhead
Underapplied Overheads = $22480 - $17298
Underapplied Overheads = $5182