Natural Cosmetics Company applies overhead costs on the basis of machine hours. The overhead rate is computed by analyzing data from the previous year to determine the percentage change in costs. Thus, this year’s overhead rate will be based on the percentage change multiplied by last year’s costs.
Machine hours 55,360
Indirect Labor $23,500.00
Employee Benefits $28,600.00
Manufacturing Supervision $18,500.00
Factory Insurance $7,800.00
Janitorial Services $12,100.00
Misc Overhead $6,000.00
This year the cost of utilities is expected to increase by 40% over the previous year; the cost of indirect labor, employee benefits, and misc overhead is expected to increase by 30% over the previous year; the cost of insurance and depreciation is expected to increase by 20% over the previous year and the cost of supervision and janatorial services is expected to increase by 10% over the previous year. Machine hours are expected to total 68,786.
1. Compute the projected costs and the overhead rate for this year, using the information about expected cost increases. (Carry your answer to three decimal places).
2. Jobs completed during this year and the machine hours used were as follows:
Job no. Machine hrs.
Determine the amount of overhead to be applied to each job and to total production during this year. (round answers to whole dollars)
3. Actual overhead costs for this year were $165,845. Was overhead under-applied or over-applied? By how much? Should the Cost of Goods Sold account be increased or decreased to reflect actual overhead costs?
Here’s the SOLUTION