Overhead application
Sunny Systems manufactures solar panels. The company has a theoretical capacity of 51,000 units annually. Practical capacity is 80 percent of theoretical capacity, and normal capacity is 80 percent of practical capacity. The firm is expecting to produce 30,140 units next year. The company uses a normal cost system and uses units as its application base. The company president, Deacon Daniels, has budgeted the following factory overhead costs:
| Indirect material |
$2.20 |
per unit |
| Indirect labor |
$144,600 |
per year plus |
$2.47 |
per unit |
| Utilities for the plant |
$5,500 |
per year plus |
$0.06 |
per unit |
| Repairs and maintenance for the plant |
$21,900 |
per year plus |
$0.42 |
per unit |
| Material handling costs |
$19,800 |
per year plus |
$0.12 |
per unit |
| Depreciation on plant assets |
$193,400 |
per year |
| Rent on plant building |
$50,700 |
per year |
| Insurance on plant building |
$12,700 |
per year |
a. Determine the cost formula for total factory overhead in the format of y = a + bX. If required, round your answers to the nearest cent.
b. Determine the total predetermined OH rate for each possible overhead application base. Round your answers to the nearest cent.
c. Assume that Sunny Systems produces 35,840 units during the year and that actual costs are exactly as budgeted. Calculate the overapplied or underapplied overhead for each possible overhead allocation base. Use the rounded answers from part (b.) in your calculations, and round all intermediate amounts to the nearest cent. Round your final answers to the nearest whole dollar.