This problem has two completely unrelated and independent scenarios – do not mix

Question

This problem has two completely unrelated and independent scenarios – do not mix the two or use the wrong information for either scenario.

Part A:

Palmyra Pallet Products Co. uses a predetermined overhead rate (POR) based on machine hours utilized, to apply manufacturing overhead to jobs. The company's estimated costs for the current year (2016) are as listed in the Excel template sheet.

It is estimated that 15,094 machine hours, and 12,458 direct labor hours will be utilized during the year (2016). Calculate the POR:

Part B:

Burlington Brewery LTD. uses direct labor hours (DLH) in its predetermined overhead rate. At the end of the year, the actual labor hours (DLH) were 3,440 hours and the total actual manufacturing overhead was $147,360.

At the beginning of the year, estimated direct labor hours (DLH) for the year were 3,850 hours and the estimated manufacturing overhead for the year was $140,525.

Calculate the Manufacturing Overhead balance at the end of the year and the journal entry to clear this amount if necessary, also indicate if it is under or over applied

ESTIMATED MO $140,525 ESTIMATED DLH 3,850 POR ACTUAL DLH 3,440 APPLIED MO ACTUAL OVERHEAD $147,360 APPLIED OVERHEAD UNDERAPLLIED OVERHEAD JOURNAL ENTRY

Explanation / Answer

Part A Palmyra Pallet Products co. Predetermined Overhead rate is based on machine hours used Estimated Manufacturing overheads = 369800 Estimated machine hours = 15094 So Predetermined overhead rate =   Estimated Overhead / estimated machine hours = 369800 / 15094 = 24.50 per machine hour Included In MO Not Included in MO Remarks Indirect Labor 172800 Indirect Expense, forms part of overheads Direct Labor 388400 Direct Expenses are treated seperately and do not form part of overheads Factory Maintenance 78600 Indirect Expense, forms part of overheads Direct Material 176900 Direct Expenses are treated seperately and do not form part of overheads Factory equipment lease 21700 Indirect Expense, forms part of overheads Sales Salaries 106900 Sales Salaries are part of selling and administration expense and do not form part of manufacturing overheads Depreciation Factory equipment 96700 Indirect Expense, forms part of overheads Total 369800 672200

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