Reference no: EM132546503

Question - The Alice Springs furniture factory estimates that for 2017 the production activity will be as follows:

Projected production 35 000 chairs

Projected direct labour hours 35 000 hours

Projected manufacturing overhead $595 000

The manufacturing overhead is allocated to production on the basis of direct labour hours. At the end of the year the following data became available:

Actual direct labour hours 31 500 hours

Actual manufacturing overhead $714 000

The direct labour costs were $70 per hour with no direct labour cost variance.

a. Calculate the predetermined manufacturing overhead rate at the beginning of the year.

b. Calculate the actual manufacturing overhead rate for the year.

c. Calculate an inventoriable product cost based on:

i. budgeted costs

ii. actual costs.

iii. Provide a suggested explanation why the original budgeted amounts should differ from the actual results.