Reference no: EM132556598
Hunter Corporation uses ABC to determine product costs for external financial reports. At the beginning of the year, management made the following cost and activity estimates in the company's five activity cost pools:
Activity Cost Pool Activity Measure Estimated Overhead Cost Expected Activity
Labour related Direct labour-hours $405,000 45,000 DLHs
Production orders Number of orders $90,000 1,125 orders
Materials receipts Number of receipts $270,000 1,800 receipts
Relay assembly Number of relays $480,000 12,000 relays
General factory Machine-hours $1,260,000 90,000 MHs
Total $2,505,000
Required:
Question 1: Compute the activity rate (i.e., predetermined overhead rate) for each of the activity cost pools.
Question 2: During the year, actual overhead cost and activity were recorded as follows:
Activity Cost Pool Actual Overhead Cost Actual Activity
Labour related $418,500 48,000 DLHs
Production orders $87,000 1,050 orders
Materials receipts $285,000 1,950 receipts
Relay assembly $480,000 11,850 relays
General factory $1,270,500 91,500 MHs
Total overhead cost: $2,541,000
a) Create a journal entry to record the incurrence of actual manufacturing overhead cost for the year (credit accounts payable). Post the entry to the company's manufacturing overhead T-account.
b) Determine the amount of overhead cost applied to production during the year.
c) Create a journal entry to record the application of manufacturing overhead cost to work in process for the year. Post the entry to the company's manufacturing overhead T-account.
d) Determine the amount of underapplied or overapplied manufacturing overhead for the year.