Natural Cosmetics Company applies overhead costs on the basis of machine hours. The overhead rate is computed by analyzing data from the previous year to determine the percentage change in costs. Thus, the 20x9 overhead rate will be based on the percentage change multiplied by the 20x8 costs. The controller prepared the overhead rate analysis for 20x9 using the following information:

In 20x9, the cost of utilities is expected to increase by 40 percent over the previous year; the cost of indirect labor, employee benefits, and miscellaneous overhead is expected to increase by 30 percent over the previous year; the cost of insurance and depreciation is expected to increase by 20 percent over the previous year; and the cost of supervision and janitorial services is expected to increase by 10 percent over the previous year. Machine hours are expected to total 68,832.
1. Compute the projected costs and the overhead rate for 20x9, using the information about expected cost increases. (Carry your answer to three decimal places.)
2. Jobs completed during 20x9 and the machine hours used were as follows:
Job No. Machine Hours
2214 ......... 12,300
2215 ......... 14,200
2216 ......... 9,800
2217 .......... 13,600
2218 ......... 11,300
2219 .......... 8,100

Determine the amount of overhead to be applied to each job and to total production during 20x9.
3. Actual overhead costs for 20x9 were $165,845. Was overhead underapplied or overapplied? By how much? Should the Cost of Goods Sold account be increased or decreased to reflect actual overheadcosts?

  • CreatedFebruary 21, 2013
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