Question

Agassi Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K. In establishing the predetermined overhead rates for 2020, the following estimates were made for the year. Department D Manufacturing overhead $1,500,000 $720,000 $450,000 Direct labor costs $959,000 $1,370,000 100,000 400,000 Direct labor hours $1,250,000 125,000 500,000 40,000 Machine hours 120,000 During January, the job cost sheets showed the following costs and production data. Department D E Direct materials used $140,000 $126,000 $78,000 Direct labor costs $120,000 $110,000 $37,500 Manufacturing overhead incurred $99,000 $124,000 $79,000 Direct labor hours 8,000 11,000 3,500 Machine hours 34,000 45,000 10,410

Answer 1

Calculate predetermined overhead rate
Department D	Estimated manufacturing overhead/Direct labor costs
Department D	959000/1370000
Department D	70.00%
Department E	Estimated manufacturing overhead/Direct labor hours
Department E	1500000/125000
Department E	1200.00%
Department K	Estimated manufacturing overhead/Machine hours
Department K	720000/120000
Department K	600.00%
Calculate overhead applied
Department D	$84,000	120000*70%
Department E	$132,000	11000*1200%
Department K	$62,460	10410*600%
Under applied or over applied overhead Department D	Actual overhead - Estimated overhead
Under applied or over applied overhead	99000-84000
Under applied Department D	$15,000
Under applied or over applied overhead Department E	Actual overhead - Estimated overhead
Under applied or over applied overhead	124000-132000
Over applied Department E	$8,000
Under applied or over applied overhead Department K	Actual overhead - Estimated overhead
Under applied or over applied overhead	79000-62460
Under applied Department K	$16,540
Department D	$15,000	Under applied
Department E	$8,000	Over applied
Department K	$16,540	Under applied