Question

Requirements:

1.	Compute Young's predetermined manufacturing overhead rate.
2.	How much manufacturing overhead was allocated to jobs during the​ year?
3.	How much manufacturing overhead was incurred during the​ year? Is manufacturing overhead underallocated or overallocated at the end of the​ year? By how​ much?
4.	Were the jobs overcosted or​ undercosted? By how​ much?

Young Foundry in Altanta, Georgia, uses a predetermined manufacturing overhead rate to allocate overhead to individual jobs based on the machine hours required. At the beginning of the year, the company expected to incur the following: (Click the icon to view the costs.) Requirements 1. Compute Young's predetermined manufacturing overhead rate. 2. How much manufacturing overhead was allocated to jobs during the year? 3. How much manufacturing overhead was incurred during the year? Is manufacturing overhead underallocated or overallocated at the end of the year? By how much? 4. Were the jobs overcosted or undercosted? By how much? i Data Table Requirement 1. Compute Young's predetermined manufacturing overhead rate. Determine the formula to calculate the predetermined overhead rate, then calculate the rule. = Predetermined overhead rate Manufacturing overhead costs ........$ 560,000 Direct labor cost ...................$ 1,400,000 Machine hours ............ 80,000 At the end of the year, the company had actually incurred the following: 1,220,000 Direct labor cost............................S Depreciation on manufacturing plant and equipment ............ ......... Property taxes on plant....... .... Sales salaries.................... Delivery drivers' wages...................... Plant janitors' wages........................ Machine hours ............. ......... 475.000 22,000 27,000 16,500 10.500 53,500 hours Choose from any drop-down list and then click Check Answer. 5 parts Clear All

Answer 1

Estimated manufacturing overhead = $560,000

Estimated machine hour = 80,000

Predetermined overhead rate = Estimated manufacturing overhead/Estimated machine hour

= 560,000/80,000

= $7 per machine hour

Manufacturing overhead allocated to the Job = Actual machine hour x Predetermined overhead rate

= 53,500 x 7

= $374,500

Actual manufacturing overhead incurred = Equipment + Property taxes on plant + Plant janitors wages

= 475,000 + 22,000 + 10,500

= $507,500

Since, manufacturing overhead allocated to the Job is less than actual manufacturing overhead, hence manufacturing overhead is under allocated at the end of the year.

Under allocated manufacturing overhead = Actual manufacturing overhead incurred - Manufacturing overhead allocated to the Job

= 507,500 - 374,500

= $133,000

Jobs were under costed by $133,000 (by the under allocated manufacturing overhead)

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