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Overhead calculations

Factory overhead is applied at a rate of $50 per machine hour. The beginning and ending balances of work in process and finished goods are zero. All goods manufactured are sold. Other information includes the following:

Cost of goods sold $ 6,000,000
Direct labor $ 2,000,000
Direct labor hours used 100,000 hours
Direct materials used $ 800,000
Indirect labor $ 500,000
Indirect supplies used $ 200,000
Machine hours used 42,000 hours
Miscellaneous factory overhead $ 1,000,000
Property taxes for the plant $ 400,000
Rent for manufacturing equipment $ 600,000

A. What is the amount of factory overhead applied?
B. What is the amount of factory overhead incurred?
C. If underapplied or overapplied overhead is allocated to cost of goods sold at the end of the period, what is the ending cost of good sold?
D. If overhead was applied at the rate of $30 per direct labor hour, what is the
amount of factory overhead applied?
E. If underapplied or overapplied overhead is allocated on a per unit basis between ending inventory and cost of goods sold, what is the ending cost of goods sold, given the facts from part (D) above

Solution Preview

A. Predetermined overhead rate = $50 per machine hour
Machine hours used = 42,000
Overhead applied = 42,000X50 = $2,100,000

B. Factory overhead incurred is the actual factory overhead. It is
Indirect labor $ 500,000
Indirect supplies used $ 200,000
Miscellaneous factory ...

Solution Summary

The solution explains how to determine the overhead rate and the amount of overhead applied

$2.19