Question

Calculating Departmental Overhead Rates and Applying Overhead to Production At the beginning of the year, Glaser...

Calculating Departmental Overhead Rates and Applying Overhead to Production

At the beginning of the year, Glaser Company estimated the following:

Assembly
Department		 Testing
Department
Total
Overhead $571,000 $696,620 $1,267,620
Direct labor hours 49,500 43,065 92,565
Machine hours 88,750 68,338 157,088

Glaser uses departmental overhead rates. In the assembly department, overhead is applied on the basis of direct labor hours. In the testing department, overhead is applied on the basis of machine hours. Actual data for the month of March are as follows:

Assembly
Department		 Testing
Department
Total
Overhead $74,230 $90,561 $164,791
Direct labor hours 6,435 5,598 12,033
Machine hours 11,538 8,884 20,422

Required:

1. Calculate the predetermined overhead rates for the assembly and testing departments. Round your answers to the nearest cent.

Assembly department overhead rate $ per direct labor hour
Testing department overhead rate $ per machine hour

2. Calculate the overhead applied to production in each department for the month of March. If required, round your answers to nearest whole value.

Assembly department $
Testing department $

3. By how much has each department's overhead been overapplied? Underapplied?

Assembly department (underapplied,overapplied?) $difference?
Testing department (underapplied, overapplied?) $difference?
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Answer #1

1. Assembly department overhead rate = Estimated overhead / Estimated direct labor hours

= $571,000 / 49,500

= $11.54

Testing department overhead rate = Estimated overhead / Estimated machine hours

= $696,620 / 68,338

= $10.19

2. Assembly department = 6,435 direct labor hours * $11.54 per direct labor hour

= $74,260

Testing department = 8,884 machine hours * $10.19 per machine hour

= $90,528

3.

Assembly department Overapplied $30 ($74,230-$74,260)
Testing department Underapplied $33 ($90,561-$90,528)
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