Question

Predetermined OH

Lansing Mfg. prepared the following annual abbreviated flexible budget for different levels of machine hours:

	40,000	44,000	48,000	52,000
Variable manufacturing overhead	$80,000	$88,000	$96,000	$104,000
Fixed manufacturing overhead	325,000	325,000	325,000	325,000

Each product requires four hours of machine time, and the company expects to produce 10,000 units for the year. Production is expected to be evenly distributed throughout the year.
a. Calculate separate predetermined variable and fixed OH rates using as the basis of application (1) units of production and (2) machine hours.
Note: Do not round your answers.

	Variable OH Rate	Fixed OH Rate
(1) Units of product
(2) Machine hours

b. Calculate the combined predetermined OH rate using (1) units of product and (2) machine hours.
Note: Do not round your answers.

	Combined Rate
(1) Units of product
(2) Machine hours

c. Assume that all actual overhead costs are equal to expected overhead costs for the year, but that Lansing Mfg. produced 11,000 units of product. If the separate rates based on units of product calculated in (a) were used to apply overhead, what amounts of underapplied or overapplied variable and fixed overhead exist at year-end?
Note: Do not use a negative sign with your answer.

Variable OH		OverappliedUnderappliedNeither over or under applied
Fixed OH		OverappliedUnderappliedNeither over or under applied

Lansing Mfg. prepared the following annual abbreviated flexible budget for different levels of machine hours:

	40,000	44,000	48,000	52,000
Variable manufacturing overhead	$80,000	$88,000	$96,000	$104,000
Fixed manufacturing overhead	325,000	325,000	325,000	325,000

Each product requires four hours of machine time and the company expects to produce 10,000 units for the year. Assume that Lansing Mfg. has decided to use units of production to apply overhead to production. In April of the current year, the company produced 900 units and incurred $7,500 and $26,500 of variable and fixed overhead, respectively.

a. What amount of variable manufacturing overhead should be applied to production in April?
Applied VOH $Answer

b. What amount of fixed manufacturing overhead should be applied to production in April?
Applied FOH $Answer

c. Calculate the under- or overapplied variable and fixed overhead for April.
Note: Do not use negative signs with your answers.

Variable OH		OverappliedUnderappliedNeither over- or underapplied
Fixed OH		OverappliedUnderappliedNeither over- or underapplied

Answer 1

Particulars Variable mfg. overheads Fixed mfg. overheads Total overheads Expected units Machine hours required per unit Total machine hours Amount ($) 80,000 3,25,000 4,05,000 10,000 4 40,000 a. Separate pre-determined VOH & FOH rates 1) Variable OH rate Fixed OH rate Units of product 8.00 [80,000/10,000] 2.00 [80,000/40,000] 32.50 [325,000/10,000] 8.125 [325,000/40,000] 2) Machine hours b. Combined rate 1) Units of product 40.50 [405,000/10,000) 10.125 [405,000/40,000] 2) Machine hours C. Remarks Lansing Mfg. produced 11,000 units and all actual overhead costs are equal to expected overhead costs for the year Actual overheads Applied overheads Calculation (Given) Variable OH 7,500 7,200 [900*$8] Fixed OH 26,500 29,250 [900*$32.50] Underapplied Overapplied CS Scanned with CamScanner