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1) Compute a Plantwide Overhead Rate Harris Fabrics computes its plantwide overhead rate annually on the basis of direct labor-hours

Accounting

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1) Compute a Plantwide Overhead Rate

Harris Fabrics computes its plantwide overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 20,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $94,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $2.00 per direct labor-hour. Harris’s actual manufacturing overhead cost for the year was $123,900 and its actual total direct labor was 21,000 hours.

Required:

Compute the company’s plantwide overhead rate for the year.

2) Apply Overhead Cost to Jobs

Luthan Company uses a plantwide overhead rate of $23.40 per direct labor-hour. This plantwide rate was based on a cost formula that estimated $257,400 of total manufacturing overhead cost for an estimated activity level of 11,000 direct labor-hours.

The company incurred actual total manufacturing overhead cost of $249,000 and 10,800 total direct labor-hours during the period.

Required:

Determine the amount of manufacturing overhead cost that would have been applied to all jobs during the period.

3) Computing Total Job Costs and Unit Product Costs Using a Plantwide Overhead Rate

Mickley Company’s plantwide overhead rate is $14.00 per direct labor-hour and its direct labor wage rate is $17.00 per hour. The following information pertains to Job A-500:

Direct materials	$231
Direct labor	$153

Required:

1. What is the total manufacturing cost assigned to Job A-500?
2. If Job A-500 consists of 40 units, what is the unit product cost for this job?

4) Underapplied and Overapplied Overhead

Osborn Manufacturing uses a predetermined overhead rate of $18.20 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $218,400 of total manufacturing overhead for an estimated activity level of 12,000 direct labor-hours.

The company actually incurred $215,000 of manufacturing overhead and 11,500 direct labor-hours during the period.

Required:

 

1.Determine the amount of underapplied or overapplied manufacturing overhead for the period.

2.Assume that the company’s underapplied or overapplied overhead is closed to Cost of Goods Sold. Would the journal entry to dispose of the underapplied or overapplied overhead increase or decrease the company’s gross margin? By how much?