Question

Check my Amberjack Company is trying to decide on an allocation base to use to assign manufacturing overhead to jobs. The company has always used direct labor hours to assign manufacturing overhead to products, but it is trying to decide whether it should use a different allocation base such as direct labor dollars or machine hours. Actual and estimated data for manufacturing overhead, direct labor cost, direct labor hours, and machine hours for the most recent fiscal year are summarized here: points eBook Estimated Value Actual Value $ 601,000 $ 403,000 $ 662,000 $ 457,000 18,700 hours 9,200 hours Manufacturing overhead cost Direct labor cost Print Direct labor hours 17,200 hours References Machine hours 8,200 hours Required: 1. Based on the company's current allocation base (direct labor hours), compute the following: a. Predetermined overhead rate. (Round your answer to 2 decimal places.) b. Applied manufacturing overhead. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.) c. Over- or underapplied manufacturing overhead. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.) 2. If the company had used direct labor dollars (instead of direct labor hours) as its allocation base, compute the following: a. Predetermined overhead rate. (Round your answer to 2 decimal places, i.e. 3.63%) b. Applied manufacturing overhead. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.) c. Over- or underapplied manufacturing overhead. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.) 3. If the company had used machine hours (instead of direct labor hours) as its allocation base, compute the following: a. Predetermined overhead rate. (Round your answer to 2 decimal places.) b. Applied manufacturing overhead. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.) c. Over- or underapplied manufacturing overhead. (Round your intermediate calculations to 2 decimal places and final answer to

Answer 1

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Amberjack Corporation
Answer 1 a
Calculation of Predetermined OH Rate	Amount $	Note
Direct Labor Hours	17,200.00	A
Estimated Manufacturing Overhead	601,000.00	B
Predetermined OH Rate	34.94	C=B/A
Answer 1 b
Calculation of applied OH	Amount $
Direct Labor Hours	18,700.00	D
Predetermined OH Rate	34.94	See C
Overhead applied	653,378.00	E=C*D
Answer 1 c
Actual Overhead	662,000.00	F
Overhead applied	653,378.00	See E
Under applied Overhead	8,622.00	G=F-E
Answer 2 a
Calculation of Predetermined OH Rate	Amount $
Direct Labor cost	403,000.00	H
Estimated Manufacturing Overhead	601,000.00	I
Predetermined OH Rate	1.49	J=I/H
Answer 2 b
Calculation of applied OH	Amount $
Direct Labor cost	457,000.00	K
Predetermined OH Rate	1.49	See J
Overhead applied	680,930.00	L=K*J
Answer 2 c
Overhead applied	680,930.00	See L
Actual Overhead	662,000.00	See F
Over applied Overhead	18,930.00	M=L-M
Answer 3 a
Calculation of Predetermined OH Rate	Amount $
Machine Hours	8,200.00	N
Estimated Manufacturing Overhead	601,000.00	O
Predetermined OH Rate	73.29	P=O/N
Answer 3 b
Calculation of applied OH	Amount $
Machine Hours	9,200.00	Q
Predetermined OH Rate	73.29	See P
Overhead applied	674,268.00	R=P*Q
Answer 3 c
Overhead applied	674,268.00	See R
Actual Overhead	662,000.00	See F
Over applied Overhead	12,268.00	S=R-F
Answer 4
Most accurate measure should be machine hour rate.