Freeman Foundry in Mount Forest, Ontario, uses a predetermined manufacturing overhead rate to allocate overhead to individual jobs based on the machine hours required. At the beginning of the year, the company expected to incur the following:
Manufacturing overhead costs ........................................................... $ 600,000
Direct labour cost............................................................................... 1,500,000
Machine hours................................................................................... 75,000
At the end of the year, the company had actually incurred the following:
Requirements
1. Compute Freeman’s predetermined manufacturing overhead rate.
2. How much manufacturing overhead was allocated to jobs during the year?
3. How much manufacturing overhead was incurred during the year? Is manufacturing over-head under-allocated or over-allocated at the end of the year? By how much?
4. Were the jobs over-costed or undercosted? By how much?