Question

Amberjack Company is trying to decide on an allocation base to use to assign manufacturing overhead to jobs. The company has always used direct labor hours to assign manufacturing overhead to products, but it is trying to decide whether it should use a different allocation base such as direct labor dollars or machine hours. Actual and estimated data for manufacturing overhead, direct labor cost, direct labor hours, and machine hours for the most recent fiscal year are summarized here: Manufacturing overhead cost Direct labor cost Direct labor hours Machine hours Estimated Value $ 601,000 $ 403,000 17, 200 hours 8, 200 hours Actual Value $ 662,000 $ 457,000 18,700 hours 9,200 hours Required: 1. Based on the company's current allocation base (direct labor hours), compute the following: a. Predetermined overhead rate. (Round your answer to 2 decimal places.) b. Applied manufacturing overhead. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.) c. Over- or underapplied manufacturing overhead. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.) 2. If the company had used direct labor dollars instead of direct labor hours) as its allocation base, compute the following: a. Predetermined overhead rate. (Round your answer to 2 decimal places, i.e. 3.63%) b. Applied manufacturing overhead. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.) c. Over- or underapplied manufacturing overhead. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.) 3. If the company had used machine hours (instead of direct labor hours) as its allocation base, compute the following: a. Predetermined overhead rate. (Round your answer to 2 decimal places.) b. Applied manufacturing overhead. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.) c. Over- or underapplied manufacturing overhead. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.)

Answer 1

1a)	predetermined overhead rate
	estimated moh/estimated direct labor hrs
	601000/17200
	34.94	per direct labor hour
b)	Applied manufacturing overhead
	predetermined overhead rate*actual hours
	18700*34.94
	653413
c)	Manufacturing overhead			underapplied by		8587
2a)	predetermined overhead rate
	estimated moh/estimated direct labor cost
	601000/403000
	149.13%	% of direct labor cost
b)	Applied manufacturing overhead
	predetermined overhead rate*actual hours
	457000*149.13%
	681524
c)	Manufacturing overhead			overapplied by		19524
3a)	predetermined overhead rate
	estimated moh/estimated machine hrs
	601000/8200
	73.29	per machine hour
b)	Applied manufacturing overhead
	predetermined overhead rate*actual hours
	9200*73.29
	674268
c)	Manufacturing overhead			overapplied by		12268
4)	Most accurate measure			Direct labor hours