Overhead Application Using a Predetermined Overhead Rate
Tiana Shar, the controller for Bondi Furniture Company, is in the process of analyzing the overhead costs for the month of November. She has gathered the following data for the month.
Labor |
|
Direct-labor hours: |
|
Job 77 | 3,500 |
Job 78 | 3,000 |
Job 79 | 2,000 |
Labor costs: |
|
Direct-labor wages | $204,000 |
Indirect-labor wages | 15,000 |
Supervisory salaries | 6,000 |
Material |
|
Inventories, November 1: |
|
Raw material and supplies | $ 10,500 |
Work in process (job 77) | 54,000 |
Finished goods | 112,500 |
Purchases of raw material and supplies: |
|
Raw material | $135,000 |
Supplies (indirect material) | 15,000 |
Direct material and supplies requisitioned for production: |
|
Job 77 | $ 45,000 |
Job 78 | 37,500 |
Job 79 | 25,500 |
Supplies (indirect material) | 12,000 |
Total | $120,000 |
Other |
|
Building occupancy costs (heat, light, depreciation, etc.) |
|
Factory facilities | $ 6,400 |
Sales offices | 1,600 |
Administrative offices | 1,000 |
Total | $ 9,000 |
Production equipment costs: |
|
Power | $ 4,100 |
Repairs and maintenance | 1,500 |
Depreciation | 1,500 |
Other | 1,000 |
Total | $ 8,100 |
The firm's job-order costing system uses direct-labor hours (measured at practical capacity) as the cost driver for overhead application. In December of the preceding year, Shar had prepared the following budget for direct-labor and manufacturing-overhead costs for the current year. The plant is theoretically capable of operating at 150,000 direct-labor hours per year. However. Shar estimates that the practical capacity is 120,000 hours in a typical year.
| Manufacturing Overhead | |
Direct-Labor Hours | Variable | Fixed |
100,000 | $325,000 | $216,000 |
120,000 | 390,000 | 216,000 |
140,000 | 455,000 | 216,000 |
During November the following jobs were completed:
Job 77 | Side chairs |
Job 78 | End tables |
Required: Assist Shar by making the following calculations.
1. Calculate the predetermined overhead rate for the current year.
2. Calculate the total cost of job 77.
3. Compute the amount of manufacturing overhead applied to job 79 during November.
4. What was the total amount of manufacturing overhead applied during November?
5. Compute the actual manufacturing overhead incurred during November.
6. Calculate the overapplied or underapplied overhead for November.
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