3) Plastic Products Company manufactures pipes and applies manufacturing costs t

Question

3) Plastic Products Company manufactures pipes and applies manufacturing costs to production at a budgeted indirect-cost rate of $12 per direct labor-hour. The following data are obtained from the accounting records for June 2014: Direct materials Direct labor (16,000 hours @ $11/hour) Indirect labor Plant facility rent Depreciation on plant machinery and equipment $350,000 176,000 20,000 100,000 Sales commissions Administrative expenses 40,000 50,000 60,000 Required: a. What actual amount of manufacturing overhead costs was incurred during June 2014? b. What amount of manufacturing overhead was allocated to all jobs during June 2014? c. For June 2014, was manufacturing overhead underallocated or overallocated? Explain

Explanation / Answer

a) Actual manufacturing overhead cost

b) Overhead allocated = 16000*12 = 192000

c) Overallocated overhead = Allocated overhead-actual overhead

= 192000-160000

Overallocated overhead = 32000

When allocated overhead is higher than actual overhead its called overallocated overhead

Indirect labour 20000 Plant facility rent 100000 Depreciation on plant and machinery 40000 Total actual manufacturing overhead cost 160000

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