Calculating Departmental Overhead Rates and Applying Overhead to Production At the beginning of the year, Glaser Company estimated the following: Assembly Department Testing Department Total Overhead $753,000 $685,230 $1,438,230 Direct labor hours 191,000 141,340 332,340 Machine hours 114,750 137,700 252,450 Glaser uses departmental overhead rates. In the assembly department, overhead is applied on the basis of direct labor hours. In the testing department, overhead is applied on the basis of machine hours. Actual data for the month of March are as follows: Assembly Department Testing Department Total Overhead $90,360 $82,228 $172,588 Direct labor hours 22,920 16,961 39,881 Machine hours 13,770 16,524 30,294
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Calculating Departmental
Overhead Rates and Applying Overhead to ProductionAt the beginning of the year, Glaser Company estimated the following:
Assembly
DepartmentTesting
Department
TotalOverhead $753,000 $685,230 $1,438,230 Direct labor hours 191,000 141,340 332,340 Machine hours 114,750 137,700 252,450 Glaser uses departmental overhead rates. In the assembly department, overhead is applied on the basis of direct labor hours. In the testing department, overhead is applied on the basis of machine hours. Actual data for the month of March are as follows:
Assembly
DepartmentTesting
Department
TotalOverhead $90,360 $82,228 $172,588 Direct labor hours 22,920 16,961 39,881 Machine hours 13,770 16,524 30,294 Required:
1. Calculate the predetermined overhead rates for the assembly and testing departments. Round your answers to the nearest cent.
Assembly department overhead rate $fill in the blank 1 per direct labor hour Testing department overhead rate $fill in the blank 2 per machine hour 2. Calculate the overhead applied to production in each department for the month of March. If required, round your answers to nearest whole value.
Assembly department $fill in the blank 3 Testing department $fill in the blank 4 3. By how much has each department's overhead been overapplied? Underapplied?
Assembly department $fill in the blank 6 Testing department $fill in the blank 8 Feedback1. Predetermined overhead rate equals the estimated overhead costs divided by the estimated activity level. Find the overhead rate for each department.
2. Multiply overhead rate in each department by the department's driver or activity.
3. Compare applied overhead to actual overhead costs incurred to determine under/over applied overhead
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