Agassi Company uses a job order cost system in each of its three manufacturing d
ID: 2463518 • Letter: A
Question
Agassi Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K. In establishing the predetermined overhead rates for 2014, the following estimates were made for the year. Compute the predetermined overhead rate for each department. (Round answers to 2 decimal places, e.g. 1.50 or 1.50%.) Compute the under- or overapplied overhead for each department at January 31.Explanation / Answer
(a)
Predetermined overhead rate for Department D = Manufacturing overhead / Direct labor costs = $1,230,056 / $1,501,900 = 0.819 = 81.90% of direct labor cost
Predetermined overhead rate for Department E = Manufacturing overhead / Direct labor hours = $1,501,895 /108,050 hours = $13.90 per direct labor hour
Predetermined overhead rate for Department K = Manufacturing overhead / Machine hours = $1,145,860 / 121,900 = $9.40 per machine hours
(c)
Manufacturing overhead incurred
Manufacturing overhead applied
Under (Over) applied
Department D
$ 100,900.00
($121,900 * 81.9%)
$ 99,836.10
$ 1,063.90
Department E
$ 125,900.00
($13.90 * 12,900 hours)
$ 179,310.00
-$ 53,410.00
Department K
$ 80,900.00
($9.40 * 12,300 hours)
$ 115,620.00
-$ 34,720.00
Manufacturing overhead incurred
Manufacturing overhead applied
Under (Over) applied
Department D
$ 100,900.00
($121,900 * 81.9%)
$ 99,836.10
$ 1,063.90
Department E
$ 125,900.00
($13.90 * 12,900 hours)
$ 179,310.00
-$ 53,410.00
Department K
$ 80,900.00
($9.40 * 12,300 hours)
$ 115,620.00
-$ 34,720.00