Findley Company and Lemon Company both use predetermined overhead rates to apply manufacturing overhead to production. Findley's is based on machine hours, and Lemon's is based on materials cost. Budgeted production and cost data for Findley and Lemon are as follows: Findley Lemon Manufacturing overhead $ 912,000 $ 990,000 Units 20,000 60,000 Machine hours 48,000 33,750 Materials cost $ 450,000 $ 1,800,000 At the end of the year, Findley Company had incurred overhead of $915,000 and had produced incurred overhead of $972,000 and had produced 61,500 units using 32,650 machine hours and 189 19,600 units using 47,780 machine hours and materials costing $445,000. Lemon Company had materials costing S1,777,500. Required: Compute the predetermined overhead rates for Findley Company and Lemon Company. Was overhead over- or underapplied for each company, and by how much?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Findley Company and Lemon Company both use predetermined
|
|
Findley |
Lemon |
|
Manufacturing overhead |
$ 912,000 |
$ 990,000 |
|
Units |
20,000 |
60,000 |
|
Machine hours |
48,000 |
33,750 |
|
Materials cost |
$ 450,000 |
$ 1,800,000 |
At the end of the year, Findley Company had incurred overhead of $915,000 and had produced incurred overhead of $972,000 and had produced 61,500 units using 32,650 machine hours and 189 19,600 units using 47,780 machine hours and materials costing $445,000. Lemon Company had materials costing S1,777,500.
Required:
- Compute the predetermined overhead rates for Findley Company and Lemon Company.
- Was overhead over- or underapplied for each company, and by how much?
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