Chapter $3-$ Job Order Costing

Custom Cabinets makes and installs special order cabinets for home renovations. The company applies overhead on the basis of direct labour hours. The company estimates its annual overhead to be $$125,000$ and it expects employees to work $10,000$ hours, totaling $$130,000$ in estimated direct costs.

During the year the following transactions occurred:

a$)$ Direct materials totaled $$170,000.$

b$)$ $$3200$ worth of office supplies were purchased $($stationery and computer ink$).$

c$)$ Depreciation total was $$12,000$ of which $75\%$ was related to the factory and $25\%$ was related to office equipment.

d$)$ Rent for the warehouse totaled $$28,000.$

e$)$ Insurance costs were $$14,700$ with $15\%$ relating to the office equipment.

t$)$ Employee costs were as follows:

i$.$ Direct labour

$$119,600$

ii$.$ Indirect labour

$$45,000$

iii. Administrative salaries

$$95,000$

iv$.$ Sales commissions

$$29,000$

v$.$ Sales salaries

$$65,000$

vi$.$ Production supervisors' salary

$$29,000$

g$)$ Advertising expenses were $$5,000$ in total for the year.

h$)$ $$7,500$ worth of supplies were requisitioned to produce cabinets.

Required:

a$.)$ Compute the predetermined overhead rate.

b$.)$ How much overhead would be applied to jobs during the year?

$.)$ By how much was overhead overapplied or underapplied for the year?