Chapter 3, Problem 3.45AP

Analyze Manufacturing Overhead (Learning Objectives 3 & 5)

Hartley Uniforms produces uniforms. The company allocates manufacturing overhead based on the machine hours each job uses. Hartley Uniforms reports the following cost data for the past year:

	Budget	Actual
Direct labor hours	7,600 hours	6,100 hours
Machine hours	7,200 hours	6,300 hours
Depreciation on salespeople’s autos	$23,000	$23,000
Indirect materials	$48,500	$50,500
Depreciation on trucks used to deliver uniforms to customers	$13,000	$11,000
Depreciation on plant and equipment	$70,000	$72,500
Indirect manufacturing labor	$40,000	$42,000
Customer service hotline	$19,000	$21,000
Plant utilities	$35,900	$38,400
Direct labor cost	$72,500	$85,500

Requirements

1. 1. Compute the predetermined manufacturing overhead rate.
2. 2. Calculate the allocated manufacturing overhead for the past year.
3. 3. Compute the underallocated or overallocated manufacturing overhead. How will this underallocated or overallocated manufacturing overhead be disposed of?
4. 4. How can managers use accounting information to help control manufacturing overhead costs?