Verizox Company uses a job order cost system with manufacturing overhead applied to products based on direct labor hours. At the beginning of the most recent year, the company estimated its manufacturing overhead cost at $300,000. Estimated direct labor cost was $400,000 for 20,000 hours.Actual costs for the most recent month are summarized here:Item Description Total CostDirect labor (1,500 hours) $ 33,000 Indirect costs Indirect labor 4,500 Indirect materials 2,500 Factory rent 4,200 Factory supervision 4,700 Factory depreciation 5,600 Factory janitorial work 1,200 Factory insurance 2,600 General and administrative salaries 3,100 Selling expenses 2,300 Required:a. Calculate the predetermined overhead rate.b. Calculate the amount of applied manufacturing overhead.c. Calculate actual manufacturing overhead costs.d. Compute over- or underapplied overhead. (Input the amount as positive value.)

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30-01-2020
Business

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Verizox Company uses a job order cost system with manufacturing overhead applied to products based on direct labor hours. At the beginning of the most recent year, the company estimated its manufacturing overhead cost at $300,000. Estimated direct labor cost was $400,000 for 20,000 hours.Actual costs for the most recent month are summarized here:Item Description Total CostDirect labor (1,500 hours) $ 33,000 Indirect costs Indirect labor 4,500 Indirect materials 2,500 Factory rent 4,200 Factory supervision 4,700 Factory depreciation 5,600 Factory janitorial work 1,200 Factory insurance 2,600 General and administrative salaries 3,100 Selling expenses 2,300 Required:a. Calculate the predetermined overhead rate.b. Calculate the amount of applied manufacturing overhead.c. Calculate actual manufacturing overhead costs.d. Compute over- or underapplied overhead. (Input the amount as positive value.)

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anijesuajayi anijesuajayi · Answer 1 · 2020-01-31T11:56:39+01:00

Answer:

1. Pre-determined overhead rate= $15

2. Applied Manufacturing Overhead - $22, 500

3. Actual Manufacturing Overhead = $25,300

4. The overhead is under-applied by $2,800

Explanation:

1. The question is to compute the company's pre-determined overhead rate

The formula = Pre-determined Overhead Rate= Estimated Manufacturing Overhead/ Number of Hours

The Estimated manufacturing overhead = $300,00; the estimated number of hours = 20,000 hours

Therefore, Predetermined Overhead rate= $300,000/ 20,000

= $15/ Direct labour hour.

2. To compute applied Manufacturing overhead

Applied Manufacturing Overhead

The predetermined Overhead rate x Direct labour hour worked

Predetermined = $15

Direct labour hour worked = 1,500 hours

The Applied Manufacturing Overhead = $15 x 1,500 hours = $22,500

3. Compute the Actual Cost of Manufacturing Overhead

Indirect Labour $4,500

Indirect Materials $2,500

Factory Rent $4,200

Factory Supervision $4,700

Factory Depreciation $5,600

Factory Janitorial work $1,200

Factory Insurance $2,600

Total $25,300

4. Calculate the Under-applied Overhead

It is over-applied if the applied manufacturing overhead cost is higher than the actual manufacturing overhead cost and under-applied if the actual manufacturing overhead is higher than the applied

Actual Manufacturing overhead = $25,300; Applied Manufacturing Overhead = $22,500

The overhead is therefore under-applied by $25,300-$22,500 = $2, 800

anthougo anthougo · Answer 2 · 2022-01-27T11:05:20+01:00

a. The calculation of Verizox Company's predetermined overhead rate is $15 ($300,000/20,000).

b. The calculation of Verizox Company's applied manufacturing overhead amount is $22,500 ($15 x 1,500).

c. The calculation of Verizox Company's actual manufacturing overhead costs is $25,300.

d. The calculation of the underapplied overhead is $2,800 ($22,500 - $25,300).

Data and Calculations:

Estimated manufacturing overhead = $300,000

Estimated direct labor cost = $400,000

Estimated direct labor hours = 20,000 hours

Actual costs:

Direct labor (1,500 hours) $ 33,000

Overhead Costs:

Indirect costs Indirect labor 4,500

Indirect materials 2,500

Factory rent 4,200

Factory supervision 4,700

Factory depreciation 5,600

Factory janitorial work 1,200

Factory insurance 2,600

Manufacturing overhead $25,300

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