Findley Company and Lemon Company both use predetermined overhead rates to apply manufacturing overhead to production. Findley's is based on machine hours, and Lemon's is based on materials cost. Budgeted production and cost data for Findley and Lemon are as follows:  FindleyLemonManufacturing overhead$ 912,000$ 990,000Units20,00060,000Machine hours48,00033,750Materials cost$ 450,000$ 1,800,000 At the end of the year, Findley Company had incurred overhead of $915,000 and had produced incurred overhead of $972,000 and had produced 61,500 units using 32,650 machine hours and 189 19,600 units using 47,780 machine hours and materials costing $445,000. Lemon Company had materials costing S1,777,500. Required: Compute the predetermined overhead rates for Findley Company and Lemon Company.Was overhead over- or underapplied for each company, and by how much?

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Asked Feb 9, 2020
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Findley Company and Lemon Company both use predetermined overhead rates to apply manufacturing overhead to production. Findley's is based on machine hours, and Lemon's is based on materials cost. Budgeted production and cost data for Findley and Lemon are as follows:

 

 

Findley

Lemon

Manufacturing overhead

$ 912,000

$ 990,000

Units

20,000

60,000

Machine hours

48,000

33,750

Materials cost

$ 450,000

$ 1,800,000

 

At the end of the year, Findley Company had incurred overhead of $915,000 and had produced incurred overhead of $972,000 and had produced 61,500 units using 32,650 machine hours and 189 19,600 units using 47,780 machine hours and materials costing $445,000. Lemon Company had materials costing S1,777,500.

 

Required:

  1. Compute the predetermined overhead rates for Findley Company and Lemon Company.
  2. Was overhead over- or underapplied for each company, and by how much?
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Expert Answer

Step 1

1.

Predetermined overhead rate for Findley Company:

Predetermined overhead rate = Estimated manufacturing overhead cost / Estimated annual driver level

Predetermined overhead rate = $912,000 / 48,000 Machine hours

Predetermined overhead rate = $19 per machine per hour 

 

Predetermined overhead ...

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