Gonzalez, Inc. manufactures stereo speakers in two factories; one in Vandalia, Illinois and another in Modesto, California. The Vandalia factory uses direct labor cost (DL$) for its overhead rate and the Modesto factory uses machine-hours (MHs) for its overhead rate. Information related to both plants for last year is presented below:??Vandalia factoryModesto factory?Estimated total manufacturing overhead cost$1,000,000$1,600,000?Estimated total amount of allocation base(a)______________200,000 MHs?Predetermined overhead rate$10 per DL$ (d)_____________?Actual amount of allocation base(b)______________190,000 MHs?Actual manufacturing overhead$1,092,500$1,472,500?Applied manufacturing overhead$1,010,000(e)_____________?Under or (over)applied overhead(c)

Question

______________(f)_____________????Required:Fill in the lettered blanks above. SHOW YOUR CALCULATIONS.

What will be an ideal response?

Answer 1

(a) Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base
$10 per DL$ = $1,000,000 ÷ Estimated total amount of the allocation base
Estimated total amount of the allocation base = $1,000,000 ÷ $10 per DL$ = $100,000

(b) Overhead applied = Predetermined overhead rate × Amount of the allocation base incurred
$1,010,000 = $10 per DL$ × Amount of the allocation base incurred
Amount of the allocation base incurred = $1,010,000 ÷ $10 per DL$ = $101,000

(c) Underapplied (overapplied) manufacturing overhead = Actual manufacturing overhead - Manufacturing overhead applied = $1,092,500 - $1,010,000 = $82,500 underapplied

(d) Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $1,600,000 ÷ 200,000 MHs = $8 per MH

(e) Overhead applied = Predetermined overhead rate × Amount of the allocation base incurred = $8 per MH × 190,000 MHs = $1,520,000

(f) Underapplied (overapplied) manufacturing overhead = Actual manufacturing overhead - Manufacturing overhead applied = $1,472,500 - $1,520,000 = -$47,500 overapplied;