Question

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 $590,000 $350,000 100,900 Direct labor hours 31,200 132,100 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

Please include how to find each question

Answer 1

1	Cutting department	$                             1.60	per machine hour
	Cutting department	$                             3.47	per direct labor hour
2	Cutting department	$                        21,824
	Cutting department	$                        29,842
3	Cutting department	$                           1,214	Overapplied
	Cutting department	$                           5,908	Underapplied
	Workings:
1		Cutting department	Cutting department
(i)	Overhead	$                     2,40,000	$                      3,50,000
(ii)	Machine hours / Direct labor hours	150000	100900
(i) / (ii)	Overhead Cost per hour	$                             1.60	$                               3.47
2		Cutting department	Cutting department
(i)	Overhead Cost per hour	$                             1.60	$                               3.47
(ii)	Machine hours / Direct labor hours	13640	8600
(i) X (ii)	Budgeted overheads	$                        21,824	$                          29,842
3		Cutting department	Cutting department
	Budgeted overheads	$                        21,824	$                          29,842
Less:	Actual overheads	20610	35750
	Overapplied/underapplied overheads	$                           1,214	$                            5,908
		Overapplied	Underapplied