The management of Sharrar Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity

The management of Sharrar Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company’s controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 45,000 machine- hours. In addition, capacity is 52,000 machine-hours and the actual activity for the year is 47,100 machine-hours. All of the manufacturing overhead is fixed and is $1,029,600 per year. For simplicity, it’s assumed that this is the esti- mated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year.

Required:
A. Determine the predetermined overhead rate if the predetermined overhead rate is based on the estimated amount of the allocation base.
B. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the estimated amount of the allocation base.

C. Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity.

D. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.

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Thibodeaux Limousine Corporation is trying to determine a predetermined manufacturing overhead

Thibodeaux Limousine Corporation is trying to determine a predetermined manufacturing overhead. Estimated overhead for the upcoming year is $776,000. Budgeted machine hours are 105,000 hours, and budgeted labor hours are 17,500 hours at a rate of $10.00 per hour. Compute the predetermined overhead rate based on:

(a) Direct labor dollars
(b) Direct labor hours
(c) Machine hours

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Coyote Trading uses a predetermined manufacturing overhead rate of $12 per machine hour

Coyote Trading uses a predetermined manufacturing overhead rate of $12 per machine hour. Last year the company had actual overhead of $898,000 and 75,000 machine hours.

(a) Compute the amount of manufacturing overhead applied.
(b) Compute the amount of over/underapplied overhead.
(c) What is the disposition of the over/under applied overhead?

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Cleveland Metals uses a job cost system and applies factory overhead to production at a predetermined rate of 180% of direct labor cost

Cost flows and overhead application

Cleveland Metals uses a job cost system and applies factory overhead to production at a predetermined rate of 180% of direct labor cost. Data pertaining to recent operations follow.

• Job no. 636 was the only job in process on January 1 of the current year. The Work in Process account contained a $24,600 balance on this date.
• Jobs no. 637, 638, and 639 were started during January.
• Total direct material requisitions and direct labor incurred during January amounted to $89,200 and $114,500, respectively.
• The only job that remained in process on January 31 was job no. 638, with costs of $15,000 for direct materials and $20,000 for direct labor.

a. Compute the total cost of the work in process inventory on January 31.
b. Compute the cost of jobs completed during January, and present the proper journal entry to reflect job completion.

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