Question

The following information pertains to Trenton Glass Works for the year just ended. Budgeted direct-labor cost: 70,000 hours (practical capacity) at $16 per hour Actual direct-labor cost: 80,000 hours at $17.50 per hour Budgeted manufacturing overhead: $997,500 Actual selling and administrative expenses: 431,000 Actual manufacturing overhead: Depreciation $233,000 Property taxes 21,000 Indirect labor 80,000 Supervisory salaries 200,000 Utilities 58,000 Insurance 32,000 Rental of space 301,000 Indirect material (see data below) 77,000 Indirect material: Beginning inventory, January 1 47,000 Purchases during the year 93,000 Ending inventory, December 31 63,000ReferencesSection BreakExercise 3-34 Overapplied or Underapplied Overhead (LO 4, 5)1.value:0.83 pointsRequired informationExercise 3-34 Part 1Required:1. Compute the firm’s predetermined overhead rate, which is based on direct-labor hours. (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Predetermined overhead rate $ per hourReferencesWorksheetExercise 3-34 Part 12.value:0.83 pointsRequired informationExercise 3-34 Part 22. Calculate the overapplied or underapplied overhead for the year. (Omit the "$" sign in your response.)

Answer 1

Answer:

Explanation:

The computation of the predetermined overhead rate is shown below:

Predetermined overhead rate = (Total estimated manufacturing overhead) ÷ (estimated direct labor-hours)

= $997,500 ÷ 70,000 hours

= $14.25

For computing the over applied or under applied overhead, first , we have to compute the actual manufacturing overhead which is shown below:

= Depreciation + Property taxes +  Indirect labor + Supervisory salaries +  Utilities +  Insurance + Rental of space + indirect material

= $233,000 + $21,000 + $80,000 + $200,000 + $58,000 + $32,000 + $301,000 + $77,000

= $1,002,000

Now we have to find the actual overhead which equal to

= Actual direct labor-hours × predetermined overhead rate

= 80,000 hours × $14.25

= $1,140,000

So, the overhead equals to

= Actual manufacturing overhead - actual overhead

= $1,002,000 - $1,140,000

= $138,000 over-applied