Question

Intronin, Inc. manufactures two products, X and Y. For 2009, Intronin estimated overhead costs would be $4,800,000, direct labor will be 192,000 hours, and there would be 960,000 machine hours. At the end of October 2009, each product used the following machine and direct labor hours.
Required:
(a) Assume that Intronin chooses to use direct labor hours to apply all overhead costs to products. What is the predetermined overhead rate? How much overhead would be assigned to each unit of Product X and Product Y?
(b) Using your calculations from part (a), calculate the under-applied or over-applied overhead based on October’s portion of the annual estimate.
(c) Assume that Intronin chooses to use machine hours to apply all overhead costs to products. What is the predetermined overhead rate? How much overhead would be assigned to each unit of Product X and Product Y?
(d) Using your calculation from part (c), calculate the under-applied or over-applied overhead based on October’s portion of the annual estimate.
(e) The manager of Product X argues that direct labor hours should be used to apply overhead, while the manager of Product Y argues that machine hours should be used. Why are they arguing?
(f) Write a memo to Intronin’s management explain- ing some of the items that should be considered when deciding how to apply overhead.


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  • CreatedMarch 27, 2015
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