Share
Explore BrainMass

Predetermined Overhead Rate and Applied Overhead

1. Amanda Bitsworth manufactures votive candles. Overhead is applied to products on the basis of direct labor hours. Last year, total overhead costs were expected to be $85,000. Actual overhead costs totaled $63,000 for 6,500 actual hours. At the end of the year, overhead was under-applied by $4,000.

A) Calculate the predetermined overhead rate. If required, round your answer to the nearest dollar. _____ per direct labor hour.
B) How much overhead should be applied to a job that was completed in three direct labor hours?

2. Kurtis Kabinets produces custom cabinetry for homes, which are sold nationwide. The company adds overhead costs to cabinetry projects at the rate of $7.55 per direct labor hour. The company accumulates overhead costs in a separate manufacturing overhead account and uses normal costing to assign overhead. The following data provide details of the company's activity and balances during the last half of the year

July 1
-Direct Materials Inventory: $60,700
-Work in progress: $43,500
-Finished-goods inventory: $24,100

December 31
-Direct Materials Inventory: $60,000
-Work in progress: $43,400
-Finished-goods inventory: $22,800

Production data for period
Direct materials purchased: $154,000
Direct labor costs ($14/hr): $261,700

A) Calculate the cost of direct materials used during the period.
B) Calculate the cost of goods manufactured during the period.
C) At the end of December, Kurtis found that it had actually incurred overhead costs of $145,000. If the company adjusts over- or under-applied overhead cost of goods sold at the end of the year, cost of goods sold will be _____ by ______ to $________

Attachments

Solution Preview

Please see attachment for complete solution.

Predetermined Overhead Rate and Applied Overhead

Amanda Bitsworth manufactures votive candles. Overhead is applied to products on the basis of direct labor hours. Last year, total overhead costs were expected to be $85,000. Actual overhead costs totaled $63,000 for 6,500 actual hours. At the end of the year, overhead was underapplied by $4,000.

Required:
A. Calculate the predetermined overhead rate. If required, round your answer to nearest dollar.
$9 per direct labor hour. (This is ($63,000 - $4,000)/6,500.)
B. How much overhead should be applied to a job that was completed in three direct labor hours?

$27.00 Correct answer
($9 per direct labor hour*3 direct labor hours = $27.)

1) Determine applied overhead by subtracting the underapplied overhead from the actual overhead.
2) Predetermined overhead rate ...

Solution Summary

This solution illustrates how to compute the predetermined overhead rate, overhead applied, raw materials used, cost of goods manufactured, and amount of unapplied overhead to charge to cost of goods sold.

$2.19