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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 4-31 and 4-32:

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

Chapter 4, Problem 31BEB, Use the following information for Brief Exercises 4-31 and 4-32: At the beginning of the year, , example  1

Brief Exercise 4-31 Predetermined Departmental Overhead Rates, Applying Overhead to Production

Refer to the information for Jonson Company above. Jonson uses departmental overhead rates. In the firing department, overhead is applied on the basis of kiln hours (number of hours spent in the gas-fired kiln). In the polishing department, overhead is applied on the basis of direct labor hours. Actual data for the month of July are as follows:

Chapter 4, Problem 31BEB, Use the following information for Brief Exercises 4-31 and 4-32: At the beginning of the year, , example  2

Required:

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

1.

To determine

Calculate the predetermined overhead rate for firing and polishing 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 for firing department:

Firingdepartmentoverheadrate=EstimatedannualoverheadEstimatedannualactivitylevel

Substitute $405,000 for estimated annual overhead and $90,000 for estimated annual activity level in the above formula.

Firingdepartmentoverheadrate=$405,000$90,000=4

2.

To determine

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

3.

To determine

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

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