Question 2 (20 marks)

Technics Inc., a manufacturing company, utilizes job order costing. Each division establishes its own estimates regarding overhead which are as follows:

	Division A	Division B
Total estimated overhead	$128,000	$261,000
Total estimated machine hours	16,000	72,500
Total estimated direct labor hours	10,000	15,000
Total actual overhead	$130,000	$250,000
Total actual machine hours	17,000	25,000
Total actual direct labor hours	18,000	14,000

Division A allocates overhead on the basis of machine hours

Division B allocates overhead on the basis of direct labor costs

Required:

For Division A and Division B,

1. Calculate the overhead application rate for the year. (3 marks)
2. What is the amount of applied overhead for the year? (3 marks)
3. What is the amount of under or overapplied overhead for the year? Indicate whether it is over- or underapplied (3 marks)