Requirement 1:
Predetermined overhead rate(POHR)= estimated manufacturing overhead/estimated direct labour hours
POHR= 594000/16500= $36 per labour hour
Applied manufacturing overhead(AMR)= actual labour hours*POHR
AMO= 18000*36= $648000
Under applied by $7000(655000-648000)
Requirement 2:
Predetermined overhead rate= estimated manufacturing overhead/estimated machine hours
POHR= 594000/7500= $79.2 per machine hour
Applied manufacturing overhead= actual machine hours*POHR
AMO= 8500*79.2=$673200
Over applied by $18200(673200-655000)
Requirement 3:
POHR= estimated manufacturing overhead/estimated direct labour cost
= 594000/396000
=$1.5 per dollar of direct labour cost
AMO= actual direct labour cost*POHR
= 450000*1.5=$675000
Over applied by $20000 (675000-655000)
Note: the formula for predetermined overhead rate is (estimated manufacturing overhead/activity base). The activity base can be taken to be the estimates direct labour hours or direct labour cost or machine hours. The solution has been calculated for all the three bases.
Data section Manufacturing overhead cost Direct labor cost Direct labor hours Machine hours Estimated value Actual...
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