Question

1 / 1 110% R 17.000 Beginning balance, Finished Goods Inventory Purchases of raw materials Factory electricity Direct labor payroll Depreciation on factory equipment Insurance on factory building Indirect materials used in production Total raw materials used in production Indirect labor payroll Cost of goods manufactured Cost of goods sold 54,000 10,000 32.000 35 000 8,000 7,000 65,000 24 000 200,000 210,000 Estimated manufacturing overhead is $450,000 and overhead is allocated based on machine hours. Estimated machine hours are 750,000 hours. Actual machine hours incurred was 145,000 hours. Actual overhead incurred was tracked to determine the adjustment to cost of goods sold for any under over applied manufacturing overhead. Instructions: Questions: 1. What is the company's predetermined overhead rate? 2. What is the amount of applied overhead for the year? 3. What is the total manufacturing cost for the year (use applied overhead? 4. Was overhead underapplied or overapplied? By how much?

Answer 1

1. Predetermined overhead rate = Estimated manufacturing overhead/Estimated machine hours = $450000/750000 = $0.60 per machine hour.

2. Amount of applied overhead = 145000 x $0.60 = $87000

3.

Direct material used in production ($65000 - $7000)	58000
Direct labor	32000
Overhead	87000
Total manufacturing cost $	177000

4.

Actual overheads incurred:
Factory electricity	10000
Depreciation on factory equipment	35000
Insurance on factory building	8000
Indirect materials used in production	7000
Indirect labor payroll	24000
Total actual overheads incurred		84000
Overhead applied		87000
Overapplied overhead $		3000