Questions 3 and 4 are based on the following information: Caledonia, Inc. applie

Question

Questions 3 and 4 are based on the following information: Caledonia, Inc. applies overhead to products using a predetermined rate based on machine hours. The data below pertain to 2011 Budgeted (1/1/11) Overhead cost Machine hours Actual $6,720,000 280,000 $6,750,000 270,000 3. What was the amount of overapplied or underapplied overhead for 2011? 4. What was Caledonia's actual overhead rate for 2011?

Explanation / Answer

Calculation of Predetermined Overhead rate Particulars Budgeted Overheads cost 6750000 Budgeted Machine hours 270000 Predetermined over head rate per Machine hours (6,750,000/270,000) 25 Calculation of Applied Over heads Particulars Predetermined over head rate per Machine hours (6,750,000/270,000) 25 Actual Machine hours 280000 Applied Overheads (25*280000) 7000000 3. Calculation of Over applied overheads or Under applied overheads Applied Overheads (25*280000) 7000000 Actual Overheads 6720000 Over applied Overheads (Applied overheads > Actual Overheads) (7,000,000 - 6,720,000) 280000 4. Calculation of caledonia's actual overhead rate for 2011 Actual Overheads cost 6720000 Actual Machine hours 280000 Actual overhead rate per Machine hours (6,720,000/280,000) 24

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