Question

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	$338,000			$630,000			$968,000
Direct labor hours	130,000			40,000			170,000
Machine hours	45,000			120,000			165,000

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	$29,850			$58,000			$87,850
Direct labor hours	11,700			3,450			15,150
Machine hours	4,100			10,900			15,000

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.

Assembly department	$
Testing department	$

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

Assembly department	Overapplied	$
Testing department	Underapplied	$

Answer 1

		Overhead	Allocation base	Total Allocation base	Overhead rate
1	Assembly Department	$338,000	DLHs	130,000	$2.60	Per DLHs
	Testing Department	$630,000	MHs	120,000	$5.25	Per MHs
2
	Assembly Department	$30,420
	(11,700 x $2.60 DLHs)
	Testing Department	$57,225
	(10,900 x $5.25 MHs)
3	Assembly department	Overapplied	$570
	Testing department	Underapplied	$775