Question 4
Easy Decorating uses a job-order costing system to collect the costs of its interior decorating business. Each client's consultation is treated as a separate job. Overhead is applied to each job based on the number of decorator hours incurred. List below are data for the current year:
Estimated overhead $840,000
Actual overhead $861,000
Estimated decorator hours 40,000
Actual decorator hours 41,500
Instructions
(a) Compute the predetermined overhead rate: $______ per decorator hour.
(b) Determine whether the overhead was under or over applied and by how much.
a) calculation of predetermined overhead rate:
Predetermined overhead rate= estimated overhead/estimated decorator hours
Predetermined overhead rate= 840000/40000= 21
Predetermined overhead rate= 21
b) actual overhead rate= 861000/41500= 20.75
Overhead is overapplied= 21-20.75= 0.25
Question 4 Easy Decorating uses a job-order costing system to collect the costs of its interior...
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