Question

eBook Calculator Predetermined Overhead Rate, Application of Overhead Findley Company and Lemon Company both use predetermined overhead rates to apply manufacturing overhead to production. Findley's is based on machine hours, and Lemon's is based on materials cost. Budgeted production and cost data for Findley and Lemon are as follows: Findley Lemon $912,000 $990,000 Manufacturing overhead Units Machine hours Materials cost 20,000 48,000 60,000 33,750 $450,000 $1,800,000 At the end of the year, Findley Company had incurred overhead of $915,000 and had produced 19,600 units using 47,780 machine hours and materials costing $445,000. Lemon Company had incurred overhead of $972,000 and had produced 61,500 units using 32,650 machine hours and materials costing $1,777,500. Required: 1. Compute the predetermined overhead rates for Findley Company and Lemon Company. Predetermined Overhead Rate Findley $ 2.4 per machine hour Lemon % of materials cost 2. Was overhead over- or underapplied for each company? Findley Lemon By how much? Findley: $ Lemon: $

Answer 1

1.

	findley company	lemon company
pre determined overhead rate=estimated manufacturing overhead/estimated base	912000/48000=19 per machine hour	990000/1800000=.55%of material cost

2.

	findley company	lemon company
estimated overhead rate/appropriate base	19	55.00%
actual machine hours used	47780
actual material cost		1777500
overhead recovered	19*47780=907820	55%*1777500=977625
actual overhead incurred	915000	972000
	underabsorbed	overabsorbed
	915000-907820=7180	5625