Problem 54 A company has two departments that all goods pass

Problem 5-4

A company has two departments that all goods pass through, machining and assembly. Machining overhead is applied based on machine hours and assembly overhead is applied based on direct labor hours. Data on each department is as follows:

A. Calculate the overhead rate for each department.

B. What is each department\'s applied overhead?

C. Calculate each department\'s overhead variance. Specify whether it is overapplied or underapplied.

	Machining	Assembly
Budgeted overhead	$75,000	$40,000
Budgeted direct labor hours	5,000	10,000
Budgeted machine hours	25,000	1,000
Actual overhead	$75,400	$39,200
Actual direct labor hours	5,203	9,980
Actual machine hours	25,040	850

Solution

Part 1 Machining Assembly Budgeted OH 75000 40000 Budgeted direct labor hours 5000 10000 Overhead Rate $          15.00 $            4.00 Part 2 Machining Assembly Actual DL Hours 5203 9980 OH Rate $          15.00 $            4.00 Applied OH $ 78,045.00 $ 39,920.00 Part 3 Machining Assembly Applied OH $ 78,045.00 $ 39,920.00 Actual OH $ 75,400.00 $ 39,200.00 Overapplied $    2,645.00 $        720.00