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

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

Brief Exercise 4-25 Convert Departmental Data to Plantwide Data, Plantwide Overhead Rate, Apply Overhead to Production

Refer to the information in Brief Exercise 4-24 for data. Now, assume that Hallett has decided to use a plantwide overhead rate based on direct labor hours.

Required:

  1. 1. Calculate the predetermined plantwide overhead rate. (Note: Round to the nearest cent.)
  2. 2. Calculate the overhead applied to production for the month of June.
  3. 3. Calculate the overhead variance for the month of June.

1.

To determine

Calculate the predetermined plant-wide overhead rate.

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 plant-wide overhead rate:

Predetermined plantwideoverheadrate=EstimatedannualoverheadEstimateda

2.

To determine

Calculate the overhead applied to production for the month of June.

3.

To determine

Calculate the overhead variance for the month of June.

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