Predetermined overhead allocation: Manufacturing overhead cost is the pool of all indirect costs incurred for production. These are the costs which are not directly traced to the product. Manufacturing costs include indirect material indirect labor and overheads . These costs are allocated to the products using the predetermined overhead allocation rate. The formula of predetermined overhead allocation rate is as follows: Predetermined overhead allocation rate = Estimated Manufacturing overhead Cost Allocation base To calculate: The predetermined overhead rate Applied manufacturing overhead, and over or under applied overhead based on direct labor hours.

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Chapter 2, Problem 7.1GBP

To determine

Concept introduction:

Predetermined overhead allocation:

Manufacturing overhead cost is the pool of all indirect costs incurred for production. These are the costs which are not directly traced to the product. Manufacturing costs include indirect material indirect labor and overheads. These costs are allocated to the products using the predetermined overhead allocation rate. The formula of predetermined overhead allocation rate is as follows:

Predetermined overhead allocation rate = Estimated Manufacturing overhead CostAllocation base

To calculate:

The predetermined overhead rate Applied manufacturing overhead, and over or under applied overhead based on direct labor hours.

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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…

a) Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year b) The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below. Using the data below and an activity-based costing approach, determine the unit product cost of each product for the current year. Expected Activity Activity Cost Estimated Product B Product H Total Pools Overhead Costs Machine setups required Purchase orders issued $180,000 600 1,200 1,800 38,382 500 100 600 Machine- 92,650 6,800 10,200 17,000 hours required Maintenance 138.968 693 907 1,600 requests ued $450,000