Question:
A manufacturing company charges its overhead to products by using a predetermined application rate that is based on machine hours.
Budgeted manufacturing overhead is 400,000
Actual manufacturing overhead is 300,000
Budgeted machine hours is 30,000
Actual machine hours is 20,000
1. What is the total of overhead applied to the production?
2. Regardless of your answer above, determine the total cost based only on the following information:
Direct materials 4,000
Direct Labor 1,000
Manufacturing overhead applied at 15% of direct labor cost
3. Then determine if this company had an overhead at year end of $6,000, where should the adjusted overapplied overhead be added:
a. Work In Process Inventory (Increase or Decrease)?
b. Manufacturing Overhead
c. Cost of Goods Sold (Increase or Decrease)?