h job uses Superior Uniforms reports the following cost data

h job uses. Superior Uniforms reports the following cost data for the past year: Data Table Budget Requirements Actual Direct labor hours. Machine hours 6,800 hours 6,500 hours Compute the predetermined manufacturing overhead rate Calculate the allocated manufacturing overhead for the past year Compute the underallocated or overallocated manufacturing overhead. How will this underallocated or overallocated manufacturing overhead be disposed of? How can managers use accounting information to help control manufacturing overhead costs? $ 23,500 S 51,500 1. 2. 3. S 23,500 Indirect materials $ 48,500 Depreciation on trucks used to deliver uniforms $ 13,500 $ 66,000 S 40,000 $ 19,500 $ 35,900 $ 71,500 11,500 67,000 41,000 S 22,000 S 37,900 $ 85,500 to customers Depreciation on plant and equipment. Indirect manufacturing labor.. 4. Print Done Direct labor cost Print Done Clear All Check Answer ing

Solution

Indirect expenses incurred while doing a business are called overheads.

Manufacturing overhead is also called as Factory overhead or Production overhead.

Manufacturing overhead includes Indirect material, Indirect labour, rent for factory building, Depreciation etc., and any other factory expenses.

Here we have to 1st calculate the total overhead value first

Calculation of Manufacturing Overhead

Amount ($)

S.no

Particulars

Budget

Actual

1

Indirect Material

$    48,500.00

$    51,500.00

2

Depreciation on Plant and Equipment

$    66,000.00

$    67,000.00

3

Indirect Manufacturing Labour

$    40,000.00

$    41,000.00

4

Plant Utilities

$    35,900.00

$    37,900.00

5

Total Manufacturing Overhead

$ 190,400.00

$ 197,400.00  

Manufacturing Overhead is to be calculated on Machine hours

Machine Hours

Budgeted = 6,800 hours

Actual = 6,500 hours

There fore

1.Pre determine overhead rate

Budgeted Manufacturing overhead = Total Budgeted Manufacturing overhead / Number of Budgeted machine hours = $190400 / 6800 hours = $28 per hour

2.Allocated Manufacturing overhead rate

Actual Manufacturing overhead = Total Actual Manufacturing overhead / Number of  Actual machine hours = $197400 / 6500 hours = $30.37 per hour

3. Compute the under allocated or Over allocated manufacturing overhead

as the Actual overhead rate is more than Budgeted overhead rate the overhead is under allocated.

Total Budgeted overhead - Total Actual overhead = Under allocated over head

$190,400 - $197,400 = -$7,000

4.The under allocated or over allocated overhead shall be transferred to Profit and loss account.

5.If we want to calculate the Actual price for any product the allocation of the overhead is very important.

So, the account information shows the under or over location of the overheads through which the managers can adjust the overhead rates periodically and recover the total cost of the product.

	Calculation of Manufacturing Overhead
		Amount ($)
S.no	Particulars	Budget	Actual
1	Indirect Material	$    48,500.00	$    51,500.00
2	Depreciation on Plant and Equipment	$    66,000.00	$    67,000.00
3	Indirect Manufacturing Labour	$    40,000.00	$    41,000.00
4	Plant Utilities	$    35,900.00	$    37,900.00
5	Total Manufacturing Overhead	$ 190,400.00	$ 197,400.00