Cost and production data for a manufacturing company for a year were as follows:
ID: 2517132 • Letter: C
Question
Cost and production data for a manufacturing company for a year were as follows:
Budgeted variable factory overhead
Budgeted fixed factory overhead
Budgeted production (direct labour hours)
Actual variable factory overhead
Actual fixed factory overhead
Actual production (direct labour hours)
$120,000
$180,000
$300,000
15,000
$125,300
$164,700
$290,000
15,500
Factory overhead is applied to production using direct labour hours as the cost driver.
Required:
(a) Calculate the factory overhead application rate, and,
(b) Under or over applied overhead.
Budgeted variable factory overhead
Budgeted fixed factory overhead
Budgeted production (direct labour hours)
Actual variable factory overhead
Actual fixed factory overhead
Actual production (direct labour hours)
$120,000
$180,000
$300,000
15,000
$125,300
$164,700
$290,000
15,500
Explanation / Answer
(a) Calculate the factory overhead application rate, and,
Overhead rate = 300000/15000 = 20 per labour hour
(b) Under or over applied overhead.
(under) over applied overhead = Applied overhead-actual overhead
= (15500*20)-290000
Over applied overhead = 20000