Baird Company and Benson Company assign manufacturing overhe

Baird Company and Benson Company assign manufacturing overhead to Work in Process Inventory using direct labor cost. The following information is available for the companies for the year: Baird Bensorn Company Company Actual direct labor cost Estimated direct labor cost Actual manufacturing overhead cost Estimated manufacturing overhead cost $146,000 171,000 101,000 90,600 90,900 151,000 55,600 66,440 Required a. Compute the predetermined overhead rate for each company b. Determine the amount of overhead cost that would be applied to Work in Process Inventory for each company. c. Compute the amount of overapplied or underapplied manufacturing overhead cost for each company.

Solution

ANSWER A :-

CALCULATION OF PREDETERMINED OVERHEAD RATE FOR BOTH COMPANIES:-

OVERHEAD ABSORPTION RATE = ESTIMATED MANUFACTURING OVERHEAD COST/ESTIMATED DIRECT LABOUR COST

overhead absorption rate=66440/151000

=0.44

overhead absorption rate=90900/101000

=0.9

ANSWER B:-

AMOUNT OF OVERHEAD COST THAT WOULD BE APPLIED TO WIP INVENTORY:-

ANSWER C:-

ACTUAL-ABSORBED

=55600-64240=8640[ OVERAPPLIED]

ACTUAL -ABSORBED

=90600-153900=63300[ OVERAPPLIED]

BAIRD COMPANY	BENSON COMPANY
overhead absorption rate=66440/151000 =0.44	overhead absorption rate=90900/101000 =0.9