Q20E-a Young Foundry uses a predetermin... [FREE SOLUTION]

Chapter 17: Q20E-a (page 943)

Young Foundry uses a predetermined overhead allocation rate to allocate overhead to individual jobs, based on the machine hours required. At the beginning of 2018, the company expected to incur the following:
Manufacturing overhead costs
$840,000
Direct labor cost
1,480,000
Machine hours
70,000 hours
At the end of 2018, the company had actually incurred:
Direct labor cost
$1,230,000
Depreciation on manufacturing plant and equipment
620,000
Property taxes on plant
35,500
Sales salaries
26,000
Delivery driver鈥檚 wages
22,500
Plant janitor鈥檚 wages
17,000
Machine hours
60,000 hours
Requirements
1. Compute Young鈥檚 predetermined overhead allocation rate.

Short Answer

Expert verified

The predetermined overhead allocation rate is $12

Step by step solution

Overhead allocation rate

Overhead allocation rate is computed to allocate the overhead cost based on the actual labor hout or actual labor cost of the company during the year.

The predetermined overhead allocation rate per direct labor dollar.

$\begin{array}{rcl} Predetermined over head allocation rate & = & \frac{Estimated manufacturing overhead cost}{Estimated machine hours} \\ = & \frac{$ 840, 000}{70, 000} \\ = & $ 12 \end{array}$

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Purchases of materials, on account	$51,000
Materials requisition:
Direct material	42,300
Indirect materials	500
Labor incurred (not yet paid):
Direct labor	20,300
Indirect labor	1,340

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Short Answer

Step by step solution

Overhead allocation rate

The predetermined overhead allocation rate per direct labor dollar.

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Manufacturing overhead costs	\(840,000
Direct labor cost	1,480,000
Machine hours	70,000 hours

Direct labor cost	\)1,230,000
Depreciation on manufacturing plant and equipment	620,000
Property taxes on plant	35,500
Sales salaries	26,000
Delivery driver鈥檚 wages	22,500
Plant janitor鈥檚 wages	17,000
Machine hours	60,000 hours