Question

+ - 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 $ 480,000 Depreciation on manufacturing plant and equipment $ 19,500 Property taxes on plant $ 26,500 Sales salaries $ 17.000 Delivery drivers' wages $ 8,500 Plant janitors' wages 56,500 hours Machine hours Wide

Answer 1

1.predetermined manufacturing overhead rate = yearly manfacturing overhead/machine hours

=630,000/90000

=$7/ machine hour

2.manufacturing overhead allocate to jobs

=predetermined overhead rate*machine hours used

=$7*56500hours

=$395,500

3.manufacturing overhead =depreciation on plant +property taxes on plant+plant janitorial wages

=$480000+19500+8500

actual manufacturing overhead incurred=$508000

** sales salaries and delivery driver wages are selling expenses and do not form part of manufacturing overhead.

manufacturing overhead is under applied by [applied 395500-actual 508000] =112500$

4.it means that job is under costed by $112500