Question

Add-ons Help All changes saved in Drive Arial -12 BIUA 2- E 1 - ! E3-25A Analyze manufacturing overhead (Learning Objectives 3&5) Smith Foundry in Columbus, Ohio, 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: Manufacturing overhead costs $630,000 Direct labor cost $1,650,000 Machine hours 90,000 At the end of the year, the company had actually incurred the following: Direct labor cost $1,230,000 Depreciation on manufacturing plant and equipment $ 480,000 MacBook Air

Answer 1

1)

Estimated yearly overhead costs	/	Estimated yearly machine hours	=	Predetermined overhead rate
630,000	/	90,000	=	7 per machine hour

2)

Actual machine hours	x	Predetermined manufacturing overhead rate	=	Allocated overhead
56,500	x	8 per machine hour	=	$452,000

　

3)

Depreciation on manufacturing plant and equipment	480,000
Property taxes on plant	19,500
Plant janitors' wages	8,500
Total manufacturing overhead	508,000

Actual manufacturing OH = 508,000

Applied OH = 56,500 * 8 = 452,000

Manufacturing overhead was underapplied by $56,000

4) It indicates that the jobs were under costed by $56,000