Question

Marigold Company manufactures a line of lightweight running shoes. CEO Mark Marigold estimated that the company would incur $2,787,680 in manufacturing overhead during the coming year. When Marigold Company uses direct labor hours as its manufacturing overhead application base, predetermined overhead rate is $12.67/DLH and when it uses machine hours as its manufacturing overhead application base, predetermined overhead rate is $5.32/MH. Additionally, he estimated the company would operate at a level requiring 220,022 direct labor hours and 524,000 machine hours. At the end of the year, Marigold Company had worked 214,000 direct labor hours, used 358,000 machine hours, and incurred $2,533,000 in manufacturing overhead.

If Marigold Company used direct labor hours as its manufacturing overhead application base, how much overhead was applied to jobs during the year?

Overhead applied

$

  

  

Using direct labor hours as the application base, was manufacturing overhead under- or overapplied for the year? By how much?

Manufacturing overhead over applied or under applied by $

  

  

If Marigold Company used machine hours as its manufacturing overhead application base, how much overhead was applied to jobs during the year?

Overhead applied

$

  

  

Using machine hours as the application base, was manufacturing overhead under- or overapplied for the year? By how much?

Manufacturing overhead overapplied or underapplied by $  .

Answer 1

Applied overhead to jobs during the year using Direct labor hours :- Applied overhead is = Actual direct labor hours * Predetermined overhead rate per direct labor hour Applied overhead is = (214000*12.67) Applied overhead is = $ 2,711,380/. Determination of Over/(Under applied) overhead :- Applied overhead 2,711,380 Actual overhead 2,533,000 Since applied overhead is more than actual overhead, It is Over applied. Over applied manufacturing overhead is $ 178,380/. Applied overhead to jobs during the year using Machine hours :- Applied overhead is = Actual machine hours * Predetermined overhead rate per machine hour Applied overhead is = (358000*5.32) Applied overhead is = $ 1,904,560/. Determination of Over/(Under applied) overhead :- Applied overhead 1,904,560 Actual overhead 2,533,000 Since applied overhead is less than actual overhead, It is Under applied. Under applied manufacturing overhead is $ 628,440/.