Question

Predetermined Overhead Rate, Applied Overhead, Unit Cost Ripley, Inc., costs products using a normal costing system. The following data are available for last year: Budgeted: Overhead $285,600 Machine hours 84,000 Direct labor hours 10,200 Actual: Overhead $285,000 Machine hours 82,200 Direct labor hours 9,930 Prime cost $1,050,000 Number of units 150,000 Overhead is applied on the basis of direct labor hours. Required: 1. What was the predetermined overhead rate? $ per direct labor hour 2. What was the applied overhead for last year? $ 3. Was overhead over- or underapplied, and by how much? = $ 4. What was the total cost per unit produced (carry your answer to four significant digits)? $ per unit

Answer 1

Answer:

1. $28

2. $278,040

3. $7,560 under-applied

4. $8.8536

Explanation:

The computation is shown below

1. Predetermined overhead rate = (Total Budgeted: Overhead) ÷ (estimated direct labor-hours)

= $285,600 ÷ 10,200 hours

= $28

2. The applied overhead would be

= Actual direct labor-hours × predetermined overhead rate

= 9,930 hours × $28

= $278,040

3. The over applied or under applied would be

= Actual manufacturing overhead - applied overhead

= $285,600 - $278,040

= $7,560 under-applied

4. Total cost per unit would be

= (Prime Cost + Applied Overhead) ÷ (Number of units)

= ($1,050,000 + $278,040) ÷ (150,000 units

= $1,328,040  ÷ 150,000 units

= $8.8536