Question

Total 4.3 At the beginning of the year, Sorrel Company estimated the following Machining Assembly Department Department Overhead $240,000 $360,000 Direct labor hours 135,000 240,000 Machine hours 200,000 $600,000 375,000 200,000 Actual data for the month of June are as follows: Total Machining Department $22.500 11,000 17.000 Assembly Department $30,750 20,000 Overhead Direct labor hours Machine hours $53,250 31,000 17,000 Machining department: overhead is applied on the basis of machine hours. Assembly department: overhead is applied on the basis of direct labor hours. Using the above information, calculate the following: 1. Predetermined overhead rates for the machining and assembly departments 2. Overhead applied to production in each department for the month of June 3. Amount of over- or underapplied overhead for the month of June for each department

Answer 1

Solution: Q4.3 1) Machining Dept. overhead rate=Total overhead/Estimated Machine hours 240000/200000 1.20 Per MH Assembly Dept. overhead rate=Total overhead/Estimated Direct labor hours 360000/240000 1.50 Per DLH 2) Machining Dept. Overhead applied-overhead rate *Actual machine hours 1.2*17000 20400 Assembly Dept. Overhead applied-overhead rate *Actual direct labor hours 1.5*20000 30000 3) Machining Dept. Actual overhead Overhead applied Underapplied overhead 22500 20400 2100 Assembly Dept. Actual overhead Overhead applied Underapplied overhead 30750 30000 750

Q4.4 1) overhead rate=Total overhead/Estimated Direct labor hours 600000/375000 1.60 Per DLH 2) Overhead applied-overhead rate*Actual direct labor hours 1.6*31000 49600 3) Actual overhead Overhead applied overhead variance (Underapplied overhead) 53250 49600 3650