Answer to Question #254777 in Finance for John

Question

Cost and production data for Rob Manufacturing for the 2018 financial year was as follows:

 

Budgeted variable factory overhead $120,000

Budgeted fixed factory overhead $180,000

Total $300,000

Budgeted production (direct labour hours) $15,000

Actual variable factory overhead $125,300

Actual fixed factory overhead $164,700

Total $290,000

Actual production (direct labour hours) 15,500

It is organisational policy and procedure that Factory overhead is applied to production using direct labour hours as the cost driver.

 

Required:

(a) Calculate the factory overhead application rate, and,

(b) Under or over applied overhead.

Answer 1

a)Computation of overhead application rate

b)Computation of over-applied overhead