Question: Luxury Goods Pty Ltd allocates manufacturing overhead to work in process on the basis of machine hours. On 1 January of the current year, there

Luxury Goods Pty Ltd allocates manufacturing overhead to work in process on the basis of machine hours. On 1 January of the current year, there were no balances in work in process or finished goods inventories. The following estimates were included in the budget for the current year:

Total estimated manufacturing overhead $300 000

Total estimated machine hours 40 000

During January, the firm worked on the following production jobs:

B81: 1 600 machine hours

J76: 2 400 machine hours

M49: 1 000 machine hours

During January, job numbers B81 and J76 were completed, and job number B81 was sold. The actual manufacturing overhead incurred during January was $30 000.

Required:

a) Calculate the company's predetermined overhead rate for the year.

b) How much manufacturing overhead was applied to production during January?

c) Calculate the overapplied or underapplied overhead for January.

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