Reference no: EM13514711

Amberjack Company is trying to decide on an allocation base to use to assign manufacturing overhead to jobs. In the past, the company has always used direct labor hours to assign manufacturing overhead to products, but it is trying to decide whether it should use a different allocation base such as direct labor dollars or machine hours.

Actual and estimated data for manufacturing overhead, direct labor cost, direct labor hours, and machine hours for the most recent fiscal year are summarized here:

Requirement 1:

Based on the companys current allocation base (direct labor hours), compute the following:

(a) Predetermined overhead rate. Predetermined overhead rate $ per direct labor hour

(b) Applied manufacturing overhead. Manufacturing overhead $

(c) Over- or underapplied manufacturing overhead.

Requirement 2:

If the company had used direct labor dollars (instead of direct labor hours) as its allocation base, compute the following:

(a) Predetermined overhead rate.

Predetermined overhead rate % of direct labor cost

(b) Applied manufacturing overhead.

Manufacturing overhead $

(c) Over- or underapplied manufacturing overhead.

Overhead $

Requirement 3:

If the company had used machine hours (instead of direct labor hours) as its allocation base, compute the following:

(a) Predetermined overhead rate.

Predetermined overhead rate $ per machine hour

(b) Applied manufacturing overhead.

Manufacturing overhead $

(c) Over- or underapplied manufacturing overhead.

Overhead $

Requirement 4:

Based on last years data alone, which allocation base would have provided the most accurate measure for applying manufacturing overhead costs to production?