Line Quiz 2Due Jan 29 noon Nokomis Company employees were ex

-Line Quiz #2-Due Jan 29 (noon) Nokomis Company employees were expected to work a combined total of 5,600 hours on its product during 2017, and ran the machines 2,400 hours. Manufacturing overhead, which is applied using a predetermined overhead rate, was expected to be $167,000. The company\'s expected activity equaled its actual activity for the year At the end of the year, it was found that manufacturing overhead was under-applied by $6,900. Answer the following. Round to two decimal points in your answers. (a) What was the predetermined overhead rate if it was applied on DL hours? $ (b) What was the predetermined overhead rate if it was applied on machine hours? (c) What was actual overhead for 2017? s

Solution

Predetermined overhead rate = Budgeted overhead / Budgeted activity

a)

Predetermined overhead based on direct labor hours

= Budgeted overhead / Budgeted labor hours

= $167,000 / 5,600

= $29.82 per Direct Labor Hour

b)

Predetermined overhead based on machine hours

= Budgeted overhead / Budgeted machine hours

= $167,000 / 2,400

= $ 69.58 per Machine Hour

c)

When overhead is under applied, and the actual activity is equal to budgeted activity, whole of the expected or budgeted overhead would have been applied based on budgeted activity level and even after that there is an under-applied overhead of $6,900

This means the actual overhead was higher than the budgeted overhead

So, Actual overhead = Budgeted overhead + Under-applied overhead

= $167,000 + $6,900

= $ 173,900