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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Use the following information for Brief Exercises 4-24 and 4-25:

At the beginning of the year, Hallett Company estimated the following:

Chapter 4, Problem 24BEA, Use the following information for Brief Exercises 4-24 and 4-25: At the beginning of the year, , example  1

Brief Exercise 4-24 Predetermined Departmental Overhead Rates, Applying Overhead to Production

Refer to the information for Hallett Company above. 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:

Chapter 4, Problem 24BEA, Use the following information for Brief Exercises 4-24 and 4-25: At the beginning of the year, , example  2

Required:

  1. 1. Calculate the predetermined overhead rates for the cutting and sewing departments.
  2. 2. Calculate the overhead applied to production in each department for the month of June.
  3. 3. By how much has each department’s overhead been overapplied? Underapplied?

1.

To determine

Calculate the predetermined overhead rate for cutting and sewing departments

Explanation

Predetermined Overhead Rate:

The amount, which is calculated at the beginning of the accounting year for a related activity by dividing the total estimated annual overhead by estimated annual activity level, is known as the predetermined overhead rate.

Use the following formula to calculate predetermined overhead rate of cutting department::

Cuttingdepartmentoverheadrate=EstimatedannualoverheadEstimatedannualactivitylevel

Substitute $240,000 for estimated annual overhead and $150,000 for estimated annual activity level in the above formula.

Cuttingdepartmentoverheadrate=$240,000$150,000=1

2.

To determine

Calculate the overhead applied to production in each department for the month of June.

3.

To determine

Calculate the amount of over applied or under applied overhead for each department.

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