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Food for thought question #1



 Lynch Audio produces stereo components for a major automotive stereo manufacturer.  It currently uses the machine hour method of applying factory overhead to production.  Information for the previous year follows:

 

Budgeted amounts

Actual amounts

Factory overhead

$3,000,000

$3,050,000

Direct labor hours @ $10 per hour

250,000

248,000

Machine hours

750,000

735,000

During the year, Lynch produced a new product, Super Tweeters, which involved $27,000 of material, 3,100 direct labor hours and 4,500 machine hours.

a.  Compute the predetermined factory overhead rate.

b.  Compute the amount of under- or overapplied factory overhead.

c.  Determine the cost of the Super Tweeter job.

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