Alberton Electronics makes inexpensive GPS navigation devices and uses a normal cost system that applies overhead based on machine hours. The following 2010 budgeted data are available:
Variable factory overhead at 100,000 machine hours......... $1,250,000
Variable factory overhead at 150,000 machine hours......... 1,875,000
Fixed factory overhead at all levels between 10,000
and 180,000 machine hours ......... 1,440,000
Practical capacity is 180,000 machine hours; expected capacity is two-thirds of practical.
a. What is Alberton Electronics’ predetermined variable OH rate?
b. What is the predetermined fixed OH rate using practical capacity?
c. What is the predetermined fixed OH rate using expected capacity?
d. During 2010, the firm records 110,000 machine hours and $2,710,000 of overhead costs. How much variable overhead is applied? How much fixed overhead is applied using the rate found in part (b)? How much fixed overhead is applied using the rate found in part (c)? Calculate the total under- or overapplied overhead for 2010 using both fixed OH rates.