Chapter 2 Case 2
The following cost data relate to the manufacturing activities for the month of January.
Direct Materials
Direct Labor
Indirect Materials
Indirect Labor
Salaries (Administrative Staff)
Insurance, Factory
Depreciation, Factory
Utilities, Factory
Direct Labor Hours
Machine Hours
Estimated Overhead costs for the year
Estimated Direct Labor hours for the year
Estimated Machine hours for the year
$10,000
$5,500
$800
$2,000
$4,000
$700
$2,500
$1,400
180 hours
305 machine hours
$92,400
2,200 hours
3,850 machine hours
Prepare a computer spreadsheet to calculate the following items. You must show your calculations.
a. Calculate the total actual overhead costs incurred for January. (Check figure: $7,400)
b. Calculate the predetermined overhead rate for the year assuming that direct labor hours are
used.
c. Calculate the overhead applied in the month of January assuming direct labor hours are used.
d. Calculate the over/under applied overhead for the month of January assuming direct labor
hours are used. (Check figure: $160 over-applied.)
e. Calculate the predetermined overhead rate for the year assuming that machine hours are used.
f. Calculate the overhead applied in the month of January assuming machine hours are used.
g. Calculate the over/under applied overhead for the month of January assuming machine hours
are used. (Check figure: $80 under-applied.)
h. Prepare the entry to close the under-applied overhead to cost of goods sold assuming machine
hours are used. (Information from item g.)