Question

Amberjack Company is trying to decide on an allocation base to use to assign manufacturing overhead to jobs. The company has always used direct labor hours to assign manufacturing overhead to products, but it is trying to decide whether it should use a different allocation base such as direct labor dollars or machine hours. Actual and estimated data for manufacturing overhead, direct labor cost, direct labor hours, and machine hours for the most recent fiscal year are summarized here: Manufacturing overhead cost Direct labor cost Direct labor hours Machine hours Estimated Value $596, eee $ 398, eee 16,700 hours 7,700 hours Actual Value $ 657. eee $ 452, eee 18, 2ee hours 8,700 hours Required: 1. Based on the company's current allocation base (direct labor hours), compute the following: a. Predetermined overhead rate. (Round your answer to 2 decimal places.) b. Applied manufacturing overhead. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.) c. Over- or underapplied manufacturing overhead. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.) 2. If the company had used direct labor dollars (instead of direct labor hours) as its allocation base, compute the following: a. Predetermined overhead rate. (Round your answer to 2 decimal places, le 3.63%)

Answer 1

Answert ) The companys cuneut allocation base:- faclaing a) pre delkrmined overhead vale = Estimated manu Direct Labor houvs. overhead / Estmated = $596.000 /16.700 35.69 per ufarkiring ourheads = Aelaal divect laber houvs x dived Loborhads * pre delar mined overhead vate b) Appled mauu pre delarmined overhead yale = 418,200 x$35.69 * Applied manufactiring.overhepds =$649,558 maue fadūriug overhead = Actuial maucifactaning overhead - Applied manutadosing O over-under applied overheads. =$657000-649,558 = $ 7442 fackring overhead=$7442 dollarsloy cat- under applied manu. 1) Allocation base is Divect Labor a) predelermined overhead rate = TEctimaled manu fad -caring overhead/ Estimated divect labor Cotjrle0 =[$596,000/4298.0o03*100 :: pre deleymined overhead ate = l4a.75 % b dixetlabor cat %3D b) Applied manufactiing overheads= Ackial direct laber castal predeler mined overhead sate. =$452,000 x 149.75 % APplied manu tactaxing overhead = Jover. eluder applied mauufackring overhead - Aclial mauufacturing overhead - Applied mance, 4676,870 utackasing overhead -$657000-$676,870 .. over apphed manufadixing overhead = $19,870 3) Allocation base in Hachiue hears :- manudadaving a) pre deter mined over head rate = Eslimaled over head / Estimated machine hours $596,000/1700 77.40 per .* pre determined Overhead rate machine hour 6) Applied mauutactaving overhead : Acluol machine hoursx poe dotermimed overhead rak. = 8,100 x $77.40 .'. Applied manbishacturing overhead = $673.380 e) over- under applied mauufacturing overhead = Actual maru facturinng overhead -Applied manufactaring overhead = $657000-$673,380 atactasing oerhead = $16.380 ..over applied manu. 4) Host accurale measure ts Direct Labor Hours