Estimated cost and operating data for three companies for the upcoming year foll

Question

Estimated cost and operating data for three companies for the upcoming year follow: Company 45,000 70,000 $290,000 $315,000 60,000 21,000 $300,000 $480,000 $536,000 Predetermined overhead rates are computed using the following bases in the three companies Overhead Rate Based On Company ...Machine-hours Y . Z Direct materials cost Required. 1. Compute the predetermined overhead rate to be used in each company during the upcoming year 2. Assume that Company X works on three jobs during the upcoming year. Direct labour-hours recorded by job are as follows: job 418, 12,000 hours; job 419, 36,000 hours; job 420, 30,000 hours. How much overhead cost will the company apply to work in process for the year? If actual overhead costs total $530,000 for the year, will overhead be under- or overapplied? By how much?

Explanation / Answer

Predetermine overhead rate :

Company X = 536000/80000 = 6.7 per labour hour

Company Y = 315000/70000 = 4.5 per machine hour

Company Z = 480000*100/300000 = 160% of direct material cost

2) Overhead applied = (12000+36000+30000)*6.7 = 522600

Actual overhead = 530000

Under applied overhead = 522600-530000 = 7400

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