Nature Cosmetics Company applies overhead costs on the basis of machine hours. The overhead rate is computed
Question:
Last Year
Machine hours...............................55,360
Overhead costs:
Indirect labor..............................$ 23,500
Employee benefits...........................28,600
Manufacturing supervision.................18,500
Utilities.......................................15,000
Factory insurance.............................7,800
Janitorial services...........................12,100
Depreciation, factory and machinery....21,300
Miscellaneous overhead.....................6,000
Total overhead...........................$132,800
This year 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 68,786.
1. Compute the projected costs, and use those costs to calculate the overhead rate for this year. (Round the rate to two decimal places.)
Nature Cosmetics Company
Overhead Rate Computation Schedule
For This Year
Predetermined overhead rate for this year: $ __________ per machine hour
2. Jobs completed during this year and the machine hours used was as follows.
Determine the amount of overhead to be applied to each job and to total production during this year. Use the rounded value of the rate from the previous step in your calculations.
3. Actual overhead costs for this year were $165,845. Was overhead under applied or over applied?-Select-Under applied Over applied Item 32 overhead: $ Should the Cost of Goods Sold account be increased or decreased to reflect actual overhead costs?
Cost of Goods Sold should be -Select-increased decreased Item 34.
4. At what point during this year was the overhead rate computed? When was it applied? Finally, when was under applied or over applied overhead determined and the Cost of Goods Sold account adjusted to reflect actual costs?
Step by Step Answer:
Principles of Accounting
ISBN: 978-1133626985
12th edition
Authors: Belverd E. Needles, Marian Powers and Susan V. Crosson