Question: The Futons for You Company sells batches of custom made futons

The Futons for You Company sells batches of custom-made futons to customers and uses predetermined rates for fixed overhead, based on machine hours. The following data are available for last year:
Budgeted and actual fixed factory overhead cost .... $160,000
Budgeted machine hours .............. 100,000
Actual machine hours used .............. 110,000

Machine Hours Used
Job 20 ....... 11,000
Job 21 ....... 16,000
Job 22 ....... 14,000
Job 23 ....... 9,000

A. Compute the estimated overhead allocation rate to be used for the year.
B. Determine the overhead to be allocated to Job 21.
C. Determine total over-applied or under-applied overhead at the end of the year.
D. Should cost of goods sold be increased or decreased at the end of the year? Why?
E. If the amount of over-applied or under-applied overhead is material, how is it assigned?

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  • CreatedJanuary 26, 2015
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