Question

P2-4A  Compute predetermined overhead rates, apply overhead, and calculate under- or overapplied overhead.
Agassi Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E and machine hours in Department K
In establishing the predetermined overhead rates for 2017, the following estimates were made for the year.
Department
	D	E	K
Manufacturing overhead	$1,200,000	$1,500,000	$900,000
Direct labor costs	$1,500,000	$1,250,000	$450,000
Direct labor hours	100,000	125,000	40,000
Machine hours	400,000	500,000	120,000
During January, the job cost sheets showed the following costs and production data.
Department
	D	E	K
Direct materials used	$140,000	$126,000	$78,000
Direct labor costs	$120,000	$110,000	$37,500
Manufacturing overhead incurred	$ 99,000	$124,000	$79,000
Direct labor hours	8,000	11,000	3,500
Machine hours	34,000	45,000	10,400
Instructions
(a)  Compute the predetermined overhead rate for each department.
Formula for predetermined overhead rate	Formula	Formula	Formula
Solution	Amount	Amount	Amount
(b)  Compute the total manufacturing costs assigned to jobs in January in each department.
	D	E	K
Manufacturing Costs
Direct Materials	140,000	126,000	78,000
Direct Labor	120,000	110,000	37,500
Overhead applied (Actual Activity base used x predetermined overhead rate from part a.)	Amount	Amount	Amount
Total	Total	Total	Total
(c)  Compute the under- or overapplied overhead for each department at January 31.
Manufacturing Overhead	D	E	K
Incurred
Applied
Under (over) applied	Amount	Amount	Amount

Answer 1