Logan Products computes its predetermined overhead rate annually on the basis of
ID: 2461345 • Letter: L
Question
Logan Products computes its predetermined overhead rate annually on the basis of direct labour hours. At the beginning of the year, it estimated that its total manufacturing overhead would be $586,000 and the total of direct labour would be 40,000 hours. Its actual total manufacturing overhead for the year was $713,400 and its actual total direct labour was 41,000 hours.
* Compute the company’s predetermined overhead rate for the year, calculate the total overhead applied, and determine the amount under- or over-applied overhead in the year.
Explanation / Answer
Overhead rate annually on the basis of direct labour hours
Estimated Manufacturing Overhead = $ 5,86,000
Estimated Direct labour hours = 40,000 hours
Estimated overhead rate = Manufacturing overhead / Direct labour hours
= 5,86,000 / 40000 = $ 14.65
Actual Manufacturing Overhead = $ 7,13,000
Actual Direct labour hours = 41,000 hours
Actual overhead rate = Manufacturing overhead / Direct labour hours
= 7,13,000 / 41000 = $ 17.39
Calculation of over-applied overhead :
Estimated Overhead =$ 5,86,000
Actual Overhead = $ 7,13,000
Over applied overhead = $ 1,27,000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.