Question

Calculating Departmental Overhead Rates and Applying Overhead to Production At the beginning of the year, Videosym Company estimated the following: Assembly Testing Department Department Total Overhead $617,000 $697,210 $1,314,210 Direct labour hours 182,000 194,740 376,740 Machine hours 59,750 44,813 104,563 Videosym uses departmental overhead rates. In the assembly department, overhead is applied on the basis of direct labour hours. In the testing department, overhead is applied on the basis of machine hours. Actual data for the month of March are as follows: Assembly Department Testing Department Total Overhead $61,700 $69,721 $131,421 Direct labour hours 18,200 19,474 37,674 5,975 4,481 10,456 Machine hours Required: 1. Calculate the predetermined overhead rates for the assembly and testing departments. Round your answers to the nearest cent. Assembly department overhead rate per direct labour hour Testing department overhead rate per machine hour 2. Calculate the overhead applied to production in each department for the month of March. If required, round your answers to nearest whole value. Assembly department Testing department 3. By how much has each department's overhead been overapplied? Underapplied? Assembly department Testing department

Answer 1

Solution 1:

Computation of Predetermined overhead rate
	Assembly Department	Testing Department
Estimated Overhead	$6,17,000	$6,97,210
/Direct Labor Hours	182000
/Machine Hours		44813
Predetermined overhead rate	$3.39	$15.56

Solution 2:

Computation of Total Overhead cost Applied
	Assembly Department	Testing Department
Predetermined overhead rate	$3.39	$15.56
*Actual direct Labor Hours	18200
*Actual Machine Hours		4481
Manufacturing Overhead applied	$61,698	$69,724

Solution 3:

	Assembly Department	Testing Department
Manufacturing Overhead applied	$61,698	$69,724
Actual Overhead	$61,700	$69,721
Difference Overhead	$2	$3
	Underapplied	Overapplied