Answer:
Albertan Electronics
a. Albertan Electronics’ predetermined variable OH rate is $20.50.
b. The predetermined FOH rate using practical capacity is $8.00.
c. The predetermined FOH rate using expected capacity is $12.00.
d1. The variable overhead applied is $1,375,000.
d2. The fixed overhead applied using the rate in (b) is $880,000.
d3. The fixed overhead applied using the rate in (c) is $1,320,000.
d4. The total under-applied overhead for 2010 at $8.00 FOH rate is $455,000 and the total under-applied overhead for 2010 at $12 FOH rate is $15,000.
Explanation:
a) Available 2010 budgeted data:
Variable factory overhead at 100,000 machine hours $1,250,000 ($12.50)
Variable factory overhead at 150,000 machine hours 1,875,000 ($12.50)
Fixed factory overhead at all levels between 10,000 and 180,000 machine hours = 1,440,000 ($8.00)
Practical capacity is 180,000 machine hours; expected capacity is two-thirds of practical (120,000) = $12 ($1,440,000/120,000)
Predetermined Overhead Rate:
Variable factory overhead = $12.50
Fixed factory overhead = 8.00
Predetermined overhead rate = $20.50
During 2010, the firm records 110,000 machine hours and $2,710,000 of overhead costs. How much variable overhead is applied? How much fixed overhead is applied using the rate found in part (b)? How much fixed overhead is applied using the rate found in part (c)? Calculate the total under- or overapplied overhead for 2010 using both fixed FOH rates.
Variable overhead applied = $12.50 * 110,000 = $1,375,000
Fixed overhead applied with $8 * 110,000 = 880,000
Total overhead applied $2,255,000
Underapplied overhead = ($2,710,000 -2,255,000) 455,000
Variable overhead applied = $12.50 * 110,000 = $1,375,000
Fixed overhead applied with $12 * 110,000 = 1,320,000
Total overhead applied $2,695,000
Underapplied overhead = ($2,710,000 -2,695,000) 15,000
