Partl At the beginning of the current year CCCR Company est

Partl - At the beginning of the current year CCCR Company estimated the following costs Direct materials Direct labour Rent on factory building Sales salaries Deprociation on factory equipment Indirect labour Production supervisors salary $4,000 $20,000 $15,000 $25,000 $8,000 $10,000 $12,000 CCc Company estimated 20,000 labour hours to be worked during the year. Actual labour hours worked were 22,000 hours. If overhead is applied on the basis of direct labour hours, what will be the overhead applied for the year? (2 marks) Part 2-RRR Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs. The company estimated manufacturing overhead at $255,000 for the ear and direct labour hours at 100,000 hours. the year totalled $270,000; actual direct labour hours were 105,000. What was the overapplied or underapplied overhead for the year? (3 marks) Actual manufacturing overhead costs incurred during

Solution

Part 1

Rent on factoy Building                                $15,000

Sales salaries                                              $ 25,000

Depreciation on factory equipment                $8,000

Indiect Labour                                              $10,000

Production supervisor\'s salary                     $12,000

                                                        _______________

Total Overhead                                           $70,000

Estimated labour hours                                  20,000

Overhead rate per labour hour                          $3.5

Actual labour hours worked                             22,000

Overhead Applied for the year= 22,000*3.5= $77,000

Part 2

Estimated manufacturing overhead                 $255,000

Estimated direct labour hours                           100,000

Estimated manuacturing overhead rate             $255,000/100,000=$2.55

Actual direct labour hours                                 105,000

Esimated manufacturing over head based on actual direct labour hours=105,000*$2.55=$267,750

Actual manufacturing overhead incurred                                                                             $270,000

Over applied for the year is $270,000-$267,750= $2,250

Based on absorption costing terminology ,can say $2,250 is under absorbed