Question

The following data pertain to the Oneida Restaurant Supply Company for the year just ended.

Budgeted sales revenue	$	200,000
Actual manufacturing overhead		338,000
Budgeted machine hours (based on practical capacity)		8,000
Budgeted direct-labor hours (based on practical capacity)		20,000
Budgeted direct-labor rate	$	13
Budgeted manufacturing overhead	$	364,000
Actual machine hours		11,000
Actual direct-labor hours		18,000
Actual direct-labor rate	$	15

Exercise 3-35 Part 1

Required:

1. Compute the firm’s predetermined overhead rate for the year using each of the following common cost drivers: (a) machine hours, (b) direct-labor hours, and (c) direct-labor dollars. (Round your answers to 2 decimal place.)

2. Calculate the overapplied or underapplied overhead for the year using each of the following cost drivers.(Round intermediate calculation to 2 decimal places.)

Answer 1

1) Predetermine overhead rate

	Cost drivers	Overhead rate
a)	Machine hours	364000/8000 = 45.50 per machine hour
b	Direct labor hours	364000/20000 = 18.20 per direct labor hour
c)	Direct labor dollars	364000/260000 = 1.4 per direct labor dollar

2) Calculate under over applied overhead

	Cost drivers		Amount
a)	Machine hours	Over applied	(45.50*11000-338000) = 162500
b	Direct labor hour	Under applied	(18.20*18000-338000) = 10400
c	Direct labor cost	Over applied	(270000*1.4-338000) = 40000