Question

Problem 3-33 Textbook p.102 The following data pertain to the Aquarius Hotel Supply Company for the year just ended: Budgeted sales revenue ....... Budgeted manufacturing overhead Budgeted machine hours Budgeted direct-labour hours. Budgeted direct-labour rate..... Actual manufacturing overhead Actual machine hours........ Actual direct-labour hours Actual direct-labour rate $945,000 650,000 20,000 25,000 $13 $690,000 22,000 26,000 $14 Required: 1. Compute the firm's predetermined overhead rate for the year using each of the following common cost drivers: (a) machine hours, (b) direct-labour hours, and (c) direct-labour dollars. 2. Calculate the overapplied or underapplied overhead for the year using each of the cost drivers listed above.

Answer 1

1)

predetermined overhead rate=budgetd manufacturing overhead/budgeted activity level

budgeted manufacturing overhead is $650000

a. machine hours

budgeted actvity level is 20000 machine hours

predetermined overhead rate=$650000/20000=$32.5 per machine hour

b. direct labour hours

budgeted activity level is 25000 direct labour hours

predetermined overhead rate=$650000/25000=$26 per diect labour hours

c. direct labour dollars

budgeted activity level is direct labour in dollars

direct labour in dollars=budgeted labour hours*budgetd labour rate

direct labour in dollars=25000*$13=$325000

predetermined overhead rate=$650000/$325000= 2 times or 200%

2)

under or over applied overhead=budgeted overhead-actual overhead

budgeted overhead is $650000

actual overhead=predetermined overhead rate*actual activity level

a. machine hours

predetermine overhead rate is $32.5 per machine hour

actual acivity level=22000 machine hours

under or over applied overhead=$650000-($32.5*22000)=$650000-$715000=$65000 under applied

b. direct labour hours

predetermine overhead rate is $26 per direct labour hour

actual acivity level=26000 direct labour hours

under or over applied overhead=$650000-($26*26000)=$650000-$676000=$26000 under applied

c.direct labours in dollar

direct labours in dollar=actual direct labour hours*actual direct labour rate.

direct labours in dollar=26000*$14=$364000

under or over applied overhead=$650000-(2*$364000)=$650000-$728000=$78000 under applied

note:if the actual overhead is greater than budgeted overhead then it is under applied and if the budgeted is greater than actual then it is over applied.