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Question - Luxury Goods Pty Ltd allocates manufacturing overhead to work in process on the basis of machine hours. On 1 January of the current year, there were no balances in work in process or finished goods inventories. The following estimates were included in the budget for the current year:
Total estimated manufacturing overhead $300,000
Total estimated machine hours 40,000
During January, the firm worked on the following production jobs:
B81: 1 600 machine hours
J76: 2 400 machine hours
M49: 1 000 machine hours
During January, job numbers B81 and J76 were completed, and job number B81 was sold. The actual manufacturing overhead incurred during January was $30 000.
Required -
a) Calculate the company's predetermined overhead rate for the year.
b) How much manufacturing overhead was applied to production during January? c) Calculate the overapplied or underapplied overhead for January.
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