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Calculate the overapplied or underapplied overhead

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Overhead application

Sunny Systems manufactures solar panels. The company has a theoretical capacity of 51,000 units annually. Practical capacity is 80 percent of theoretical capacity, and normal capacity is 80 percent of practical capacity. The firm is expecting to produce 30,140 units next year. The company uses a normal cost system and uses units as its application base. The company president, Deacon Daniels, has budgeted the following factory overhead costs:

Indirect material $2.20 per unit
Indirect labor $144,600 per year plus $2.47 per unit
Utilities for the plant $5,500 per year plus $0.06 per unit
Repairs and maintenance for the plant $21,900 per year plus $0.42 per unit
Material handling costs $19,800 per year plus $0.12 per unit
Depreciation on plant assets $193,400 per year
Rent on plant building $50,700 per year
Insurance on plant building $12,700 per year

a. Determine the cost formula for total factory overhead in the format of y = a + bX. If required, round your answers to the nearest cent.

y  =  $  +  $  X

b. Determine the total predetermined OH rate for each possible overhead application base. Round your answers to the nearest cent.

c. Assume that Sunny Systems produces 35,840 units during the year and that actual costs are exactly as budgeted. Calculate the overapplied or underapplied overhead for each possible overhead allocation base. Use the rounded answers from part (b.) in your calculations, and round all intermediate amounts to the nearest cent. Round your final answers to the nearest whole dollar.

Reference no: EM131814157

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