Calculate separate predetermined variable and ?xed oh rates

Question:

(Predetermined OH rates) Lansing Mfg. prepared the following 2010 abbreviated ?exible budget for di?erent levels of machine hours:

 40,000 44,000 48,000 52,000 Variable manufacturing overhead \$ 80,000 \$ 88,000 \$ 96,000 \$104,000 Fixed manufacturing overhead 325,000 325,000 325,000 325,000

Each product requires 4 hours of machine time, and the company expects to produce 10,000 units in 2010. Production is expected to be evenly distributed throughout the year.

a. Calculate separate predetermined variable and ?xed OH rates using as the basis of application (1) units of production and (2) machine hours.

b. Calculate the combined predetermined OH rate using (1) units of product and (2) machine hours.

c. Assume that all actual overhead costs are equal to expected overhead costs in 2010, but that Lansing Mfg. produced 11,000 units of product. If the separate rates based on units of product calculated in part (a) were used to apply overhead, what amounts of under applied or over applied variable and ?xed overhead exist at year-end 2010?

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