Question:
(Predetermined OH rates; capacity measures) Albertan Electronics makes inexpensive GPS navigation devices and uses a normal cost system that applies over- head based on machine hours. The following 2010 budgeted data are available:
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Variable factory overhead at 100,000 machine hours
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$1,250,000
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Variable factory overhead at 150,000 machine hours
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1,875,000
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Fixed factory overhead at all levels between 10,000 and 180,000 machine hours
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1,440,000
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Practical capacity is 180,000 machine hours; expected capacity is two-thirds of practical. a. What is Albertan Electronics' predetermined variable OH rate?
b. What is the predetermined ?xed OH rate using practical capacity?
c. What is the predetermined ?xed OH rate using expected capacity?
d. During 2010, the ?rm records 110,000 machine hours and $2,710,000 of overhead costs. How much variable overhead is applied? How much ?xed overhead is applied using the rate found in part (b)? How much ?xed overhead is applied using the rate found in part (c)? Calculate the total under- or over applied overhead for 2010 using both ?xed OH rates.