Question

The Fast & Furious Company produces two products: toy planes and toy race cars.

They use departmental overhead rates for the two production departments: molding and finishing.

Molding uses machine hours to assign overhead and Finishing uses direct labor hours. 50,000 planes and 250,000 race cars are produced.

Please find the following data:

Molding Finishing Total Estimated Overhead $250,000 $100,000 $350,000

Actual Overhead $240,000 $120,000 $360,000

Expected Direct Labor Hours planes 5,000 5,000 10,000

race cars 5,000 35,000 40,000

Expected Machine Hours planes 17,000 3,000 20,000

race cars 3,000 7,000 10,000

Actual Direct Labor Hours planes 4,500 5,300 10,000

race cars 5,500 34,500 40,000

Actual Machine Hours planes 16,500 3,500 20,000

race cars 3,200 6,800 10,000

How much overhead is applied to the planes?

Answer 1

Molding department overhead rate = Molding department estimated overheads/Expected machine hours

= 250,000/20,000

= $12.5 per machine hour

Finishing department overhead rate = Finishing department estimated overheads/Expected direct labor hours

= 100,000/40,000

= $2.5 per direct labor hour

Overhead applied to planes

Molding department overhead (12.5 x 17,000)	212,500
Finishing department overhead (2.5 x 5,000)	12,500
Total applied overheads	$225,000

Kindly comment if you need further assistance. Thanks