Module 10 Conversion Cycle Homework Use complete sentences. Show and label all w

Question

Module 10 Conversion Cycle Homework Use complete sentences. Show and label all work to receive any credit for the homework. 5. Chris P. Critters Manufacturing produces three models of grills: the small rare grill, the medium grill and the large welldone grill. The large well done grill has the most features and is made of 100% stainless steel. Chris applies product-sustaining overhead to each product based on the number of engineering hours involved in the product. It is estimated that 600 engineering hours will be required in the next period and that product sustaining overhead costs will be $25,000. At the end of the period the following was discovered: Actual Engineering Hours Incurred 220 260 180 Small Rare Medium The actual product sustaining overhead costs for the period were $23,600. Required: a. Determine the amount of overhead applied to each of the products in the product line. b. Determine the amount of over or under applied overhead.

Explanation / Answer

Overhead absorption rate

= Budgeted overhead / Budgeted Engineering hours

= $25,000 / 600

= $ 41.67 per hour

The following table shows the calculations

So, overhead applied to each division is given by row C and over absorbed overhead is given by row E

Calculations Particulars Small Rare Medium Large well done Total A Actual hours       220.00          260.00             180.00 B Overhead absorption rate          41.67            41.67               41.67 C = A x B Overhead applied    9,167.40    10,834.20         7,500.60    27,502.20 D Actual overhead                 -                     -                        -      25,000.00 E = Total C - Total D Overapplied overhead                 -                     -                        -        2,502.20

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