Question

Assembly Department Particulars Manufacturing overhead Direct manufacturing labor costs Direct manufacturing labor-hours Machine-hours Machining Department AED3,000,000 AED 1,400,000 100.000 hours 50,000 hours AED8,750,000 AED2.500,000 200.000 hours 200,000 hours Assembly Department During May, the job-cost record for Job 707 contained the following Machining Particulars Department Direct matenals used AED65,000 Direct manufacturing labor costs AED24,000 Direct manufacturing labor-hours 1,000 hours Machine-hours 2,800 hours AED45,000 AED17.500 1,500 hours 1,000 hours REQUIRED b. At the end of 2020, the actual manufacturing overhead costs were AED 1.850,000 in machining department and AED8.250.000 in assembly department. It was reported that 32,000 actual machine-hours were used in machining department and actual direct manufacturing labor costs in assembly department were AED2,200000. Compute the over- or under allocated manufacturing overhead for each department WhatsApp Image.jpeg s PW

Answer 1

Calculation of Predetermined overhead rate :Estimated overhead/Estimated budgeted activity

	Machining	Assembling
Estimated overhead	3,000,000	8,750,000
Estimated activity	50,000	2,500,000
Predetermined overhead rate (A/B)	60 per MH	3.5 or 350% of direct labor cost

	Machining	Assembling
Actual activity	32000 MH	2,200,000
Predetermined overhead rate	60 per MH	350% of direct labor cost
Total Allocated overhead	32000*60=1920000	2200000*350%=7700000

	Machining	Assembling
Actual overhead	1850000	8250000
Less :Total Allocated overhead	1920000	7700000
Under-allocated /(Over-allocated) overhead	(70000)over-allocated (enter as 70000 if needs to be entered as positive value)	550000 under-allocated