What does it mean when overhead is over- or underapplied? What costs are affected by this and what are the two different ways to adjust for the over- or underapplied amount?
Aster Manufacturing uses the weighted-average method of process costing. The following information was available for the current year:
Number of units Production Costs
Beginning work-in-process (90% complete) 100,000 $ 540,000
Current period production 1,500,000 9,036,000
Ending work-in-process (90% complete) 40,000
A.How many total equivalent units were completed during the year?
B.What was the cost per equivalent unit?
C.What is the cost allocated to the ending work-in-process units?
D.What is cost of goods manufactured for the year?
Triangle Catering assigns overhead to specific jobs based on direct labor hours. At the beginning of the current year, estimated overhead costs were $500,000 and estimated direct labor hours were 40,000. By the end of the year, actual overhead costs were calculated to be $525,000 and actual direct labor hours were 45,000.
A.Calculate the predetermined overhead rate.
B.How much overhead would be applied to a particular catering job that required 15 direct labor hours?
C.How much total overhead was applied during the year?
D.By how much was overhead over- or underapplied for the year? Be sure to indicate whether it was over- or underapplied.
The solution has problems relating to overhead calculations and calculation of equivalent units under process costing.