Problem 5-4 A company has two departments that all goods pass through, machining

Question

Problem 5-4

A company has two departments that all goods pass through, machining and assembly. Machining overhead is applied based on machine hours and assembly overhead is applied based on direct labor hours. Data on each department is as follows:

A. Calculate the overhead rate for each department.

B. What is each department's applied overhead?

C. Calculate each department's overhead variance. Specify whether it is overapplied or underapplied.

Machining Assembly Budgeted overhead $75,000 $40,000 Budgeted direct labor hours 5,000 10,000 Budgeted machine hours 25,000 1,000 Actual overhead $75,400 $39,200 Actual direct labor hours 5,203 9,980 Actual machine hours 25,040 850

Explanation / Answer

Part 1 Machining Assembly Budgeted OH 75000 40000 Budgeted direct labor hours 5000 10000 Overhead Rate $          15.00 $            4.00 Part 2 Machining Assembly Actual DL Hours 5203 9980 OH Rate $          15.00 $            4.00 Applied OH $ 78,045.00 $ 39,920.00 Part 3 Machining Assembly Applied OH $ 78,045.00 $ 39,920.00 Actual OH $ 75,400.00 $ 39,200.00 Overapplied $    2,645.00 $        720.00

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