question archive Alpha and Beta both use predetermined overhead rates to apply factory overhead to production
Alpha and Beta both use predetermined overhead rates to apply factory overhead to production
Subject:AccountingPrice: Bought3
Alpha and Beta both use predetermined overhead rates to apply factory overhead to production. Alpha's is based on direct labour hours and Beta's is based on material cost. Budgeted production and cost data for Alpha and Beta are as follows:
Manufacturing Overhead
Units
Direct labour hours Material cost
Alpha $240,000
10,000 6,000 $150,000
Beta $300,000
20,000 7,500 $400,000
At the end of the year Alpha Company had incurred overhead of $221,000 and produced 9,800 units using 6,100 direct labour hours and materials costing $147,000.
Beta had incurred overhead of $316,500 and produced 20,500 units using 7,550 direct labour hours and materials costing $411,000.
Required
(a) Compute the predetermined overhead rates for Alpha and Beta.
(b) Was overhead over or under applied for each company and by how much?
(a)
Alpha predetermined overhead rate= $240,000/6,000 = $40 per DLH Beta predetermined overhead rate = $300,000/400,000 = .75, or
(b)
Alpha:
Actual overhead Applied overhead
Beta:
Actual overhead Applied overhead
= 75% of materials cost
$221,000
244,000 ($40 x 6,100)
$ 23,000 over applied
$316,500
308,250 (.75 x $411,000)
$ 8,250 under applied
