2 Privack Corporation has a standard cost system in which it applies overhead to
ID: 2569507 • Letter: 2
Question
2 Privack Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below: 14.28 points Budgeted variable overhead cost per direct labor-hour Total budgeted fixed overhead cost per year Budgeted direct labor-hours (denominator level of activity) Actual direct labor-hours standard direct labor-hours allowed for the actual output $3.50 622,499 59,286 83,000 82,000 Required 1. Compute the predetermined overhead rate for the year. Be sure to include the total budgeted fixed overhead and the total budgeted variable overhead in the numerator of your rate. (Round your answer to the nearest whole dollar amount.) 2. Compute the amount of overhead that would be applied to the output of the period. (Round your intermediate calculations and final answer to the nearest whole dollar amount.) Answer is complete but not entirely correct. Predetermined overhead rate per DLH 14 2. Overhead applied $ 1,162,000Explanation / Answer
Privack Corporation:
Predetermined overhead rate = total overhead/budgeted direct labor hours
Total overhead = fixed overhead + variable overhead
Fixed overhead = $622,499
Variable overhead = variable overhead rate x budgeted direct labor hours
Budgeted direct labor hours = 59,286
Variable overhead rate = $3.50
Variable overhead = $3.5 x 59,286 = $207,501
Total overhead = $622,499 + $207,501 = $830,000
Predetermined overhead rate = $830,000/59,286 = $14
Amount of overhead applied for the output of the period = predetermined overhead rate x standard direct labor hours allowed for the actual output of the period
Predetermined overhead rate = $14
Standard direct labor hours allowed for actual output = 82,000
Amount of overhead applied for the output = $14 x 82,000 = $1,148,000
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