Chapter 4, Problem 14P

Abbey Products Company is studying the results of applying factory 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 process 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:

Required:

1. 1. Compute the predetermined rate, based on the following:
2. a. Direct labor cost
3. b. Direct labor hours
4. c. Machine hours
5. 2. Using each of the methods, compute the estimated total cost of each job at the end of the month.
6. 3. Determine the under-or overapplied factory overhead, in total, at the end of the month under each of the methods.
7. 4. Which method would you recommend? Why?