Chapter 3, Problem 3.51BP

Analyze Manufacturing Overhead (Learning Objectives 3 & 5)

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

	Budget	Actual
Direct labor hours	7,600 hours	6,100 hours
Machine hours	7,000 hours	6,500 hours
Depreciation on salespeople’s autos	$23,000	$23,000
Indirect materials	$50,500	54000
Depreciation on trucks used to deliver uniforms to customers	$16,000	$15,000
Depreciation on plant and equipment	$68,000	$69,000
Indirect manufacturing labor	$39,500	$42,500
Customer service hotline	$21,500	$22,500
Plant utilities	$38,000	$40,500
Direct labor cost	$72,500	$86,500

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?