Ludwig enterprises makes only one product. The company has a theoretical capacity of 50,000 unit annually. Practical capacityis 80 percent of theoretical capactiy, and normal capacity is 80 percent of practical capacity. The firm is expecting to produce 30,000 units next year. The company president, Mandy Moss, has budgeted the following factory overhead costs for the coming year:
Indirect Materials: $2.00 per unit
Indiret labor: $144,000 plus $2.50 per unit
Utilities for the plant: $6,000 plus $0.04 per unit
Repairs and maintenance for the plant: $20,000 plus $.034 per unit
Material Handling costs: $16,000 plus $0.12 per unit
Depreciation on plan assets: $210,000 per year
Rent on plant building: $50,000 per year
Insurance on plant building: $12,000 per year
A) Determine the cost formula for total factory overhead in the format of y = a + bX
B) Determine the total predetermined OH rate for each possible overhead application base.
C) Assume that Ludwig produces 35,000 units during the year and that actual costs are exactly as budgeted.
D) Calculate the overapplied or under applied overhead for each possible overhead allocation base.