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overhead to production. The following predictions have been made for 2014:Total factory overhead costs$150,000Direct labor hours40,000 hoursDirect labor costs$200,000Machine hours60,000 hours
Required:a.Compute the predetermined factory overhead rate under three different bases: (1) direct labor hours, (2) direct labor costs, and (3) machine hours.b.Assume that actual factory overhead was $152,500 and that Lavender elected to apply factory overhead to Work in Process based on direct labor hours. If actual direct labor was 42,000 hours for 2014, was factory overhead overapplied or underapplied? By how much?c.Lavender Company follows the policy of writing off any under- or overapplied factory overhead balance to Costof Goods Sold at the end of the year. Make the entry necessary at the end of 2014 to dispose of the factory overhead balance determined in Part (b).a.(1) Direct labor hours: ($150,000/40,000 hours) = $3.75per DLH(2) Direct labor costs: ($150,000/$200,000) = 75%of DLC(3) Machine hours: ($150,000/60,000 hours) = $2.50per MHb.Overhead applied (42,000 ´ $3.75)$157,500Actual overhead152,500Overapplied overhead by$5,000c.Factory Overhead5,000Cost of Goods Sold5,000193. The Custom Guitar Company uses a predetermined overhead rate of $5 per machine hour to apply overhead. During the year, 32,500 machine hours were worked. Actual manufacturing overhead cost for the year was $187,500. Company records showed the following account balances at the end of the year:Materials$ 22,500Work in process37,500Finished goods50,000Cost of goods sold112,500Required:a.Determine the amount of underapplied or overapplied overhead.b.Assuming the amount of underapplied or overapplied overhead is material, determine underapplied or overapplied overhead that would be allocated to the following accounts if the allocation is made using ending account balances:Work in ProcessFinished GoodsCost of Goods Soldc.Assuming the amount of underapplied or overapplied overhead is material, calculate the new balance of the following accounts after underapplied or overapplied overhead has been allocated:Work in ProcessFinished GoodsCost of Goods Soldd.Determine the balance of Cost of Goods Sold if underapplied or overapplied overhead is immaterial.
a.$25,000 underapplied$187,500 -($5 ´ 32,500)b.Work in Process, $4,687.50$25,000 ´ ($37,500/$200,000)Finished Goods, $6,250.00$25,000 ´ ($50,000/$200,000)Cost of Goods Sold, $14,062.50$25,000 ´ ($112,500/$200,000)c.Work in Process, $42,187.50 = $37,500 + $4687.50Finished Goods, $56,250 = $50,000 + $6,250Cost of Goods Sold, $126,562.50 = $112,500 + $14,062.50d.$137,500 = $112,500 + $25,000194. The Anchorage plant of the Tundra Company produces two calculators and has two production departments: assembly and packaging. Information for the products is given below:DeluxeRegularTotalUnits produced20,000200,000Prime costs$160,000$1,500,000$1,660,000Direct labor hours20,000160,000180,000Number of setups6040100Machine hours10,00080,00090,000Inspection hours2,00016,00018,000Number of moves180120300
The following table presents activity information about the departments and products:AssemblyPackagingTotalDirect labor hours:Deluxe10,00010,00020,000Regular150,00010,000160,000Total160,00020,000180,000Machine hours:Deluxe2,0008,00010,000Regular8,00072,00080,000Total10,00080,00090,000Overhead Costs:Setting equipment$120,000$ 120,000$240,000Moving material60,00060,000120,000Machining20,000180,000200,000Inspection16,000144,000160,000Total$216,000$504,000$720,000Required:a.