XYZ estimated the following for the year 2017: Cutting Department Sewing Departm

Question

XYZ estimated the following for the year 2017:

                                                Cutting Department       Sewing Department

                Overhead                   $200,000                                $300,000

                Labor Hours                    20,000                                   15,000

XYZ uses labor hours for a plant-wide allocation rate.

Actual data for January is as follows:

                Overhead                      $16,000                                 $24,000

                Labor Hours                       1,500                                    1,100

a. Calculate the plant-wide predetermined overhead rate.

b. Calculate the overhead applied to production for the month of January.

c. Calculate the overhead variance for the month of January and note whether such is over or under applied.

Explanation / Answer

Requirement a: Plant-wide predetermined overhead rate: Cutting Sewing A Overhead 200000 300000 B Labor Hours 20000 15000 C Predetermined Overhead Rate (A/B) 10 20 Requirement b: Overheads applied to production: Cutting Sewing A Predetermined Overhead Rate 10 20 B Labor Hours 1500 1100 C Overheads applied to production (A*B) 15000 22000 Requirement c: Overhead Variance: Cutting Sewing A Actual Overheads 16000 24000 B Overheads Applied 15000 22000 C Overhead Variance (B-A) -1000 -2000 D Over/ Under Applied Under applied Under applied

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