Findley Company and Lemon Company both use predetermined overhead rates
Findley Company and Lemon Company both use predetermined overhead rates to apply manufacturing overhead to production. Findley’s is based on machine hours, and Lemon’s is based on materials cost. Budgeted production and cost data for Findley and Lemon are as follows:
At the end of the year, Findley Company had incurred overhead of $915,000 and had produced 19,600 units using 47,780 machine hours and materials costing $445,000. Lemon Company had incurred overhead of $972,000 and had produced 61,500 units using 32,650 machine hours and materials costing $1,777,500.
Required:
1. Compute the predetermined overhead rates for Findley Company and Lemon Company.
2. Was overhead over- or under-applied for each company, and by how much?
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