Jon Dear estimates that itsproduction workers will produce 100,000 units during

Question

Jon Dear estimates that itsproduction workers will produce 100,000 units during the upcomingperiod and that overhead costs will amount to $500,000.

a. Calculate the predetermined overhead rate based on expectedproduction.

b. Assume that actual output totaled only 90,000 units. How muchoverhead cost was allocated to work in process?

c. Also assume the actual overhead cost incurred was $540,000. Byhow much was overhead over-applied or under-applied during theperiod? (Be sure to indicate whetherover-or-under-applied.)

Explanation / Answer

500000 / 100000

90000 * 5

Expected Production 100,000.00 Estimated Overhead Costs 500,000.00 Predetermined Overhead rate

500000 / 100000

Predetermined OverheadRate 5 Actual output 90,000.00 Overhead allocated to process

90000 * 5

Overhead allocated toprocess 450,000.00 ( B ) Actual Overhead cost incurred 540,000.00 ( A ) Overhead underapplied 90,000.00 ( A ) - ( B )

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