P4-14 Determining overhead rates, using direct labor cost, direct labor hour, and machine hour methods; determining job cost; computing underapplied and overapplied overhead Abbey Products Company is studying the results of applying factory overhead to production. The following data have been used: estimated factory overhead, $60,000; estimated materials costs, $50,000; estimated direct labor costs, $60,000; estimated direct labor hours, 10,000; estimated machine hours, 20,000; work in pro- cess at the beginning of the month, none.

The actual factory overhead incurred for November was $80,000, and the production statistics on November 30 are as follows:

Resolve using this format:

Direct Labor Costs Direct Labor Hours Job Date Jobs Completed Nov. 10 101 $ 6,000 1,000 102.. 12,000 Nov. 14 103.. Materials Costs $ 5,000 7,000 8,000 9,000 10,000 11,000 $50,000 13,500 Machine Hours 3,000 3,200 4,000 3,400 6,500 1,500 21,600 2,000 2,500 2,600 4,500 Nov. 20 104.. In process Nov. 26 105. 15,600 29,000 2,400 $78,500 106.. 400 In process Total ... 13,000 IMUND Required: 1. Compute the predetermined rate, based on the following: a. Direct labor cost b. Direct labor hours c. Machine hours 2. Using each of the methods, compute the estimated total cost of each job at the end of the month. 3. Determine the under- or overapplied factory overhead, in total, at the end of the month under each of the methods. 4. Which method would you recommend? Why? Critical Thinking Problem Problem 4-14 1. Predetermined rates: a. Estimated overhead Estimated labor cost Direct labor cost rate - = + b. Estimated overhead Estimated labor hours Direct labor hour rate + c. Estimated overhead Estimated machine hours Machine hour rate = 2. Total cost of jobs: Job 101 Job 102 Job 103 Job 104 Job 105 Job 106 Total Materials Direct labor Total prime cost Applied ovel Direct labor cost Direct labor hour Machine hour Total cost using direct labor cost Total cost using direct labor hour Total cost using machine hour 3. Under- and overapplied overhead: Direct Labor Cost Direct Labor Hour Machine Hour Actual factory overhead Applied overhead Direct labor cost Direct labor hour Machine hour Underapplied (overapplied) overhead 4