Amberjack Company is trying to decide on an allocation base to use to assign manufacturing overhead to jobs. The company has always used direct labor hours to assign manufacturing overhead to products, but it is trying to decide whether it should use a different allocation base such as direct labor dollars or machine hours. Actual and estimated data for manufacturing overhead, direct labor cost, direct labor hours, and machine hours for the most recent fiscal year are summarized here: Estimated Value Actual Value Manufacturing overhead cost $ 597,000 $ 658,000 Direct labor cost $ 399,000 $ 453,000 Direct labor hours 16,800 hours 18,300 hours Machine hours 7,800 hours 8,800 hours Required: Based on the company’s current allocation base (direct labor hours), compute the following:Predetermined overhead rate. Note: Round your answer to 2 decimal places. Applied manufacturing overhead. Note: Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount. Over- or underapplied manufacturing overhead. Note: Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount. If the company had used direct labor dollars (instead of direct labor hours) as its allocation base, compute the following:Predetermined overhead rate. Note: Round your answer to 2 decimal places, i.e. 3.63%. Applied manufacturing overhead. Note: Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount. Over- or underapplied manufacturing overhead. Note: Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount. If the company had used machine hours (instead of direct labor hours) as its allocation base, compute the following:Predetermined overhead rate. Note: Round your answer to 2 decimal places. Applied manufacturing overhead. Note: Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount. Over- or underapplied manufacturing overhead. Note: Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount. Based on last year’s data alone, which allocation base would have provided the most accurate measure for applying manufacturing overhead costs to production?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Amberjack Company is trying to decide on an allocation base to use to assign manufacturing
Actual and estimated data for manufacturing overhead, direct labor cost, direct labor hours, and machine hours for the most recent fiscal year are summarized here:
| Estimated Value | Actual Value | |||
|---|---|---|---|---|
| $ 597,000 | $ 658,000 | |||
| Direct labor cost | $ 399,000 | $ 453,000 | ||
| Direct labor hours | 16,800 | hours | 18,300 | hours |
| Machine hours | 7,800 | hours | 8,800 | hours |
Required:
Based on the company’s current allocation base (direct labor hours), compute the following:Predetermined overhead rate.
Note: Round your answer to 2 decimal places.
Applied manufacturing overhead.
Note: Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.
Over- or underapplied manufacturing overhead.
Note: Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.
If the company had used direct labor dollars (instead of direct labor hours) as its allocation base, compute the following:Predetermined overhead rate.
Note: Round your answer to 2 decimal places, i.e. 3.63%.
Applied manufacturing overhead.
Note: Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.
Over- or underapplied manufacturing overhead.
Note: Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.
If the company had used machine hours (instead of direct labor hours) as its allocation base, compute the following:Predetermined overhead rate.
Note: Round your answer to 2 decimal places.
Applied manufacturing overhead.
Note: Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.
Over- or underapplied manufacturing overhead.
Note: Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.
Based on last year’s data alone, which allocation base would have provided the most accurate measure for applying manufacturing overhead costs to production?
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