Question

Exercise 3 (Applying Overhead with Various Bases) Estimated cost and operating data for three companies for the upcoming year are given below: Company Direct labor-hours Machine-hours Raw materials cost Manufacturing overhead 30,000 90,000 P160,000 40,000 18,000 P240,000 60,000 25,000 P300,000 432,000 270,000 384,000 cost Predetermined overhead rates are computed using the following bases in the three companies: Company Overhead Rate Based on - Direct labor-hours Machine-hours Raw materials cost

Answer 1

Answer

• All working forms part of the answer
• Requirement 1

	X	Y	Z
Manufacturing Overhead cost	P        432,000.00	P       270,000.00	P      384,000.00
Overhead rate base	Direct labor hours	machine hours	Raw material cost
Amount of base	60,000 Direct labor hours	90,000 machine hours	P 240,000
Predetermined Overhead rate	P                     7.20	P                    3.00	P                   1.60
	per direct labor hours	per machine hours	per material cost

• Requirement 2

Applied overhead [see working]	417,600
Actual costs	420,000
Overheads are	Under - Applied , because applied are less than actual.
Under - Applied by	2,400

--Working

	Job 237	Job 238	Job 239	Total
Direct labor hours	7,000.00	30,000.00	21,000.00	58,000.00
Predetermined Overhead rate	7.20	7.20	7.20	7.20
Overhead cost allocated	50,400.00	216,000.00	151,200.00	417,600.00