Question

Ana Carillo and Associates is a medium-sized company located near a large metropolitan area in the Midwest. The company manufactures cabinets of mahogany, oak, and other fine woods for use in expensive homes, restaurants, and hotels. Although some of the custom, many of the cabinets are a standard size. One such non-custom model is called Luxury Base Frame. Normal production is 1,120 units. Cach unit has a direct labor hour standard of 5 hours. Overhead is applied to production based on standard direct labor hours. During the most recent month, only 1,010 u produced; 5,000 dect lahor haurs were allawed for standard productian, but only 4,500 haurs were used. Standard and actual averhead costs were as follows Actual (1,010 units) (1,120 units) Indirect materials Indirect labor (Fixed) Manufacturing supervisors salaries (Fixed) Manufacturing affice employees salaries (Fixed) Engincering casts Computer costs Electricity (Fixed) Manufacturing building depreciation (Flxed) Machinery depreclation (Fixed) Trucks and forklift depreciation Small tools (Fixed) Insurance Fixed) Praperty taxes 13,600 48,900 25,600 14,800 30,700 11,400 2,800 9,100 3,400 1,700 800 57D 340 $163,710 S 14,000 58,000 25,000 14,200 28,400 11,400 2,800 9,100 3,400 1,700 1,390 570 340 $170,500 Total(a) Determine the overhead application rate. (Round answer to 2 decimal places, e.g. 15.75.) Overhead application rate 29.23 per direct labor hour Attempts: 1 of 3 used ? (b) Determine how much overhead was applied to productian. (Round answer to Applied overhead decimal places, e.g. 1,575.)

Answer 1

Answer:

a. $29.23

b. $146,150

Explanation:

a. The computation of overhead application rate is shown below:-

Overhead application rate = Total standard overhead ÷ Total standard hours

= $163,710 ÷ (1,120 × 5)

= $163,710 ÷ 5,600

= $29.23

So, for determining the overhead application rate we simply divide the total standard overhead by total standard hours.

b. The computation of overhead was applied to production is shown below:-

Applied overhead = Standard hours for actual production × Overhead application rate

= 5,000 × $29.23

= $146,150

So, for determining the applied overhead we simply divide the standard hours for actual production by overhead application rate