Question

Calculate and Use Manufacturing Overhead Rate During the coming accounting year, Ester Manufacturing, Inc., anticipates the following costs, expenses, and operating data: Direct material (15,000 lb.) $ 225,000 Direct labor (@ $12/hr.) 480,000 Indirect material 35,000 Indirect labor 60,000 Sales commissions 90,000 Factory administration 65,000 Non factory administrative expenses 70,000 Other manufacturing overhead* 140,000 *Provides for operating 150,000 machine hours. a. Calculate the predetermined manufacturing overhead rate for the coming year for each of the following application bases: (1) direct labor hours, (2) direct labor costs, and (3) machine hours. Round direct labor hours and machine hours answers to two decimal places, when applicable. Round direct labor costs to two decimal places, when applicable (example: 76.25%). Application base Manufacturing overhead rate Direct labor hours $Answer Direct labor costs Answer% Machine hours $Answer b. For each item in requirement a, determine the proper application of manufacturing overhead to Job 128, to which 45 direct labor hours, $500 of direct labor cost, and 160 machine hours have been charged. Round answers to two decimal places, when applicable. Application base Overhead applied to Job 63 Direct labor hours $Answer Direct labor costs $Answer Machine hours $Answer

Answer 1

a) Calculate predetermine overhead rate :

Predetermine overhead rate = Estimted overhead/Estimated allocation base

Basis on direct labour hour = 300000/40000 = 7.5 per labour hour

Basis on direct labour cost = 300000*100/480000 = 62.5% of direct labour cost

Basis on machine hour = 300000/150000 = 2 per machine hour

b) Calculate overhead applied :

Basic on direct labour hour = 45*7.5 = 337.50

Basis on direct labour cost = 500*62.5% = 312.50

Basis on machine hour = 162*2 = 320