Reference no: EM13585797

Sunny Systems manufactures solar panels. The company has a theoretical capacity of 50,000 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 29,600 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			$2.06	per unit
Indirect labor	$159,800	per year plus	$2.50	per unit
Utilities for the plant	$9,000	per year plus	$0.03	per unit
Repairs and maintenance for the plant	$24,300	per year plus	$0.35	per unit
Material handling costs	$13,700	per year plus	$0.10	per unit
Depreciation on plant assets	$178,900	per year
Rent on plant building	$40,300	per year
Insurance on plant building	$10,800	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.

	Overhead application rates
Theoretical:	$ per unit
Practical:	$ per unit
Normal:	$ per unit
Expected:	$ per unit

c. Assume that Sunny Systems produces 34,500 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.

	(Under-) Overapplied Amount
Theoretical:	$	(Overapplied,Underapplied)
Practical:	$	Overapplied,Underapplied)
Normal:	$	(Overapplied,Underapplied)
Expected:	$	(Overapplied,Underapplied)