2. A local restaurant has developed the following cost estimation equation, wher

Question

2. A local restaurant has developed the following cost estimation equation, where X = the number of customers served: Overhead costs = $7,790 + $1.33X a. At the beginning of the year, they had predicted they would serve 43,225 customers. Calculate the predicted overhead for the year. b. Determine the predetermined overhead rate per customer served. c. Sales turned out to be higher than anticipated. At the end of the year, they had served 47,853 customers. Over the year, they had accumulated $68,000 in overhead costs. Determine the under or overapplied overhead at the end of the year.

Explanation / Answer

overhead cost = 7790 + 1.33x

a)
for x = 43225
overhead cost = 7790 + 1.33*43225 = $65,279.25

b)
overhead rate per customer = $1.33

c)
for x = 47853
overhead cost = 7790 + 1.33*47853 = $71,434.49 (expected)

Actual overhead cost = $68000

overapplied overhead = $71,434.49 - $68,000 = $3,434.49

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