Answer:
Brooks Foundry
1. Predetermined manufacturing overhead rate
= $8
2. Allocated manufacturing overhead = Overhead rate multiplied by actual machine hours
= $8 * 54,500
= $436,000
3. Manufacturing overhead incurred during the year = $517,500
Manufacturing overhead is underallocated at the end of the year.
The underallocation = $81,500 ($517,500 - 436,000)
4. The jobs were undercosted by $81,500.
Explanation:
a) Data and Calculations:
Estimated costs:
Manufacturing overhead = $650,000
Direct labor cost = $1,300,000
Machine hours = 81,250
Actual costs:
Direct labor cost $1,190,000
Overhead costs:
Depreciation on manufacturing
plant and equipment $485,000
Property taxes on plant $21,500
Plant janitors' wages $11,000
Total actual overhead costs $517,500
Machine hours 54,500 hours
b) Selling Expenses:
Sales salaries $26,000
Delivery drivers' wages $14,500
Total $40,500
c) Computation of the predetermined manufacturing overhead rate:
Predetermined overhead rate = estimated manufacturing overhead costs divided by estimated machine hours
= $650,000/81,250
= $8
