Question

Item3 4.28 points eBookReferencesCheck my workCheck My Work button is now enabledItem 3 Yarra Fabrication estimates that its manufacturing overhead will be $2,342,400 in year 1. It further estimates that direct material costs will amount to $1,464,000. During July, Yarra worked on four jobs with actual direct materials costs of $76,000 for Job 0701, $104,000 for Job 0702, $135,000 for Job 0703, and $67,000 for Job 0704. Actual manufacturing overhead costs for the year were $2,480,000. Actual direct materials costs were $1,630,000. Manufacturing overhead is applied to jobs based on direct materials cost using predetermined rates. Required: a. How much overhead was applied to each of the four jobs, 0701, 0702, 0703, and 0704? b. What was the over- or underapplied manufacturing overhead for year 1?

Answer 1

1. The amount of overhead applied to each of the four jobs are $121,600, $166,400, $216,000 and $107,200 respectively.
2. The overapplied manufacturing overhead for year 1 is equal to $128,000.

How to calculate the amount of overhead?

First of all, we would calculate the predetermined overhead rate by using this formula:

Predetermined overhead rate = Manufacturing overhead/Direct material costs

Predetermined overhead rate = $2,342,400/$1,464,000

Predetermined overhead rate = 1.6 per DM $.

Next, we would calculate the overhead applied by using this formula:

Overhead applied = Job × DM cost

For job 0701, we have:

Overhead applied = 76,000 × 1.6

Overhead applied = $121,600.

For job 0702, we have:

Overhead applied = 104,000 × 1.6

Overhead applied = $166,400.

For job 0703, we have:

Overhead applied = 135,000 × 1.6

Overhead applied = $216,000.

For job 0704, we have:

Overhead applied = 67,000 × 1.6

Overhead applied = $107,200.

Part B.

For the overapplied manufacturing overhead for year 1:

Less applied overhead = $1,630,000 × 1.6

Less applied overhead = $2,608,000.

Overapplied manufacturing overhead = Actual overhead cost - Less applied overhead

Overapplied manufacturing overhead = $2,480,000 - $2,608,000

Overapplied manufacturing overhead = $128,000.

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