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Overhead Allocation

Overhead Allocation

Last Year’s Costs Current Year’s Changes
Machine hours                     38,000                                45,858
Overhead costs
Indirect materials  $                 58,000 30%
Indirect labor                     25,000 20%
Supervision                     41,000 10%
Utilities                     11,200 20%
Labor-related costs                       9,000 10%
Depreciation, factory                     10,500 10%
Depreciation, machinery                     27,000 20%
Property taxes                       3,000 20%
Insurance                       2,000 20%
Miscellaneous overhead                       5,000 10%
Total overhead                   191,700
1) Projected Costs and Overhead Rate
Overhead costs
Indirect materials  $                 75,400
Indirect labor                     30,000
Supervision                     45,100
Utilities                     13,440
Labor-related costs                       9,900
Depreciation, factory                     11,550
Depreciation, machinery                     32,400
Property taxes                       3,600
Insurance                       2,400
Miscellaneous overhead                       5,500
Total overhead  $               229,290
Overhead rate  $                          5 Per machine hour
2) Overhead Applied
Job No. Machine Hours Overhead Cost
H-142                       7,840  $                            39,200
H-164                       5,260                                26,300
H-175                       8,100                                40,500
H-201                     10,680                                53,400
H-218                     12,310                                61,550
H-304                       2,460                                12,300
Total  $                          233,250
3) Over or Underapplied Overhead
Applied overhead  $                          233,250
Actual overhead                              234,000
underapplied overhead                                    (750)
The cost of goods sold should be increased by $750 to reflect the actual overhead cost
The point during this year when the overhead rate was computed Beginning of the year
When it was applied During the year
When the underapplied or overapplied over-head determined and the Cost of Goods Sold, the account is adjusted to reflect actual costs End of year

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Overhead Allocation

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Overhead Allocation

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