Valtec Company has three manufacturing divisions (listed below). Each division has its own job order costing system and forecasts the following manufacturing costs for the upcoming year:

The predetermined overhead rates for each division are based on the following:
Wayne Division: Machine hours
Monroe Division: Materials to be used
Yates Division: Direct labor hours
1. Compute the predetermined overhead rate to be used by each division.
2. If the Wayne Division actually had 37,000 machine hours and $49,000 of manufacturing overhead, will overhead be over- or under-applied and by how much?
3. If the Monroe Division used 95,000 pounds of materials, what will be the applied manufacturing overhead?
4. Interpretive Question: Of the two commonly used methods to dispose of over- or under-applied manufacturing overhead, which method would you recommend andwhy?

Transcribed Image Text:

Division Yates Wayne 120,000 45,000 40,000 Monroe Materials to be used (lbs.) Direct labor hours Machine hours Total budgeted manufacturing overhead 80,000 25,000 15,000 100,000 25,000 $70,000 $50,000 $45,000