Predetermined Departmental Overhead Rates, Applying Overhead to Production At the beginning of the year, Hallett Company estimated the following: Cutting Department Sewing Department Total Overhead $240,000 $350,000 $590,000 Direct labor hours 31,200 99,100 130,300 Machine hours 150,000 — 150,000 Hallett uses departmental overhead rates. In the cutting department, overhead is applied on the basis of machine hours. In the sewing department, overhead is applied on the basis of direct labor hours. Actual data for the month of June are as follows: Cutting Department Sewing Department Total Overhead $20,610 $35,750 $56,360 Direct labor hours 2,800 8,600 11,400 Machine hours 13,640 — 13,640 Required: 1. Calculate the predetermined overhead rates for the cutting and sewing departments. Round your answers to the nearest cent. Cutting department $ per machine hour Sewing department $ per direct labor hour 2. Calculate the overhead applied to production in each department for the month of June. Use overhead application rates that are rounded to the nearest cent in your calculations, and round your final answers to the nearest dollar. Cutting department $ Sewing department $ 3. By how much has each department's overhead been overapplied or underapplied? Cutting department $ overapplied Sewing department $ underapplied
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.
Predetermined Departmental
At the beginning of the year, Hallett Company estimated the following:
| Cutting Department | Sewing Department | Total | |||
| Overhead | $240,000 | $350,000 | $590,000 | ||
| Direct labor hours | 31,200 | 99,100 | 130,300 | ||
| Machine hours | 150,000 | — | 150,000 |
Hallett uses departmental overhead rates. In the cutting department, overhead is applied on the basis of machine hours. In the sewing department, overhead is applied on the basis of direct labor hours. Actual data for the month of June are as follows:
| Cutting Department | Sewing Department | Total | |||
| Overhead | $20,610 | $35,750 | $56,360 | ||
| Direct labor hours | 2,800 | 8,600 | 11,400 | ||
| Machine hours | 13,640 | — | 13,640 |
Required:
1. Calculate the predetermined overhead rates for the cutting and sewing departments. Round your answers to the nearest cent.
| Cutting department | $ per machine hour |
| Sewing department | $ per direct labor hour |
2. Calculate the overhead applied to production in each department for the month of June. Use overhead application rates that are rounded to the nearest cent in your calculations, and round your final answers to the nearest dollar.
| Cutting department | $ |
| Sewing department | $ |
3. By how much has each department's overhead been overapplied or underapplied?
| Cutting department | $ overapplied |
| Sewing department | $ underapplied |
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