Answer:
1. 9.50 per machine hour
2. $1,040
3. $37,000
; Increase
Explanation:
1. Fixed predetermine overhead rate:
= Fixed manufacturing overhead cost ÷ Machine-hours required
= 650,000 ÷ 100,000
= 6.5 per machine hour
Variable predetermine overhead rate = 3 per machine hour
Total predetermine overhead rate:
= Fixed predetermine overhead rate + Variable predetermine overhead rate
= (6.5 + 3)
= 9.50 per machine hour
2. Total manufacturing cost:
= Direct material + Direct labor + Manufacturing overhead
= $450 + $210 + (40 × 9.5)
= $450 + $210 + $380
= $1,040
3. Applied overhead:
= Total machine hours × Total predetermine overhead rate
= 146,000 × $9.50
= $1,387,000
Actual overhead = $1,350,000
Over applied overhead:
= Applied overhead - Actual overhead
= $1,387,000 - $1,350,000
= $37,000
If this amount were closed out entirely to cost of goods sold then net operating income will be increase.
