P4-14 Determining overhead rates, using direct labor cost, direct labor hour, and machine hour methods; determining job cost; computing underapplied and overapplied overhead Abbey Products Company is studying the results of applying fac- tory overhead to production. The following data have been used: estimated factory overhead, $60,000; estimated materials costs, $50,000; estimated direct labor costs, $60,000; estimated direct labor hours, 10,000; estimated machine hours, 20,000; work in pro- cess at the beginning of the month, none. The actual factory overhead incurred for November was $80,000, and the production statistics on November 30 are as follows:
P4-14 Determining overhead rates, using direct labor cost, direct labor hour, and machine hour methods; determining job cost; computing underapplied and overapplied overhead Abbey Products Company is studying the results of applying fac- tory overhead to production. The following data have been used: estimated factory overhead, $60,000; estimated materials costs, $50,000; estimated direct labor costs, $60,000; estimated direct labor hours, 10,000; estimated machine hours, 20,000; work in pro- cess at the beginning of the month, none. The actual factory overhead incurred for November was $80,000, and the production statistics on November 30 are as follows:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
P4-14 Determining overhead rates, using direct labor cost, direct labor hour, and machine hour methods; determining
The actual factory overhead incurred for November was $80,000, and the production statistics on November 30 are as follows:
Transcribed Image Text:Materials
Direct
Direct Labor
Machine
Date Jobs
Job
Costs
Labor Costs
Hours
Hours
Completed
101
$ 5,000
$ 6,000
1,000
3,000
Nov. 10
102..
7,000
12,000
2,000
3,200
Nov. 14
103..
8,000
13,500
2,500
4,000
Nov. 20
104..
9,000
15,600
2,600
3,400
In process
105.
10,000
29,000
4,500
6,500
Nov. 26
106..
11,000
2,400
400
1,500
In process
Total ...
$50,000
$78,500
13,000
21,600
Required:
1. Compute the predetermined rate, based on the following:
a. Direct labor cost
b. Direct labor hours
C.
Machine hours
2. Using each of the methods, compute the estimated total cost
of each job at the end of the month.
3. Determine the under- or overapplied factory overhead, in total,
at the end of the month under each of the methods.
Critical
Thinking
Problem
4.
Which method would you recommend? Why?
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