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![E2-16 Calculating Actual and Applied Manufacturing Overhead Costs and Over- or Underapplied Overhead Costs [LO 2-3, 2 4, 2-5, 2-6] Verizox Company uses a job order cost system with manufacturing overhead applied to products based on direct labor hours. At the beginning of the most recent year, the company estimated its manufacturing overhead cost at $172,800. Estimated direct labor cost was $417,600 for 18,000 hours. Actual costs for the most recent month are summarized here Item Description Direct labor (1,800 hours) Indirect costs Total Cost $41,761 Indirect labor Indirect materials Factory rent Factory supervision Factory depreciation Factory janitorial work Factory insurance General and administrative salaries Selling expenses 2,570 3,310 3,250 4,840 5,690 1,140 1,780 4,190 5,500 Required 1. Calculate the predetermined overhead rate. (Round your answer to 2 decimal places.) Predetermined Overhead Rate Per DL Hour](https://d2vlcm61l7u1fs.cloudfront.net/media%2F588%2F58812e9c-60ee-4a73-be77-73285c8db0cf%2FphpRcD1vO.png "Question & Answer: E2-16 Calculating Actual and Applied Manufacturing Overhead Costs and Over- or Underapplied Overhead Costs [L..... 1")
E2-16 Calculating Actual and Applied Manufacturing Overhead Costs and Over- or Underapplied Overhead Costs [LO 2-3, 2 4, 2-5, 2-6] Verizox Company uses a job order cost system with manufacturing overhead applied to products based on direct labor hours. At the beginning of the most recent year, the company estimated its manufacturing overhead cost at $172,800. Estimated direct labor cost was $417,600 for 18,000 hours. Actual costs for the most recent month are summarized here Item Description Direct labor (1,800 hours) Indirect costs Total Cost $41,761 Indirect labor Indirect materials Factory rent Factory supervision Factory depreciation Factory janitorial work Factory insurance General and administrative salaries Selling expenses 2,570 3,310 3,250 4,840 5,690 1,140 1,780 4,190 5,500 Required 1. Calculate the predetermined overhead rate. (Round your answer to 2 decimal places.) Predetermined Overhead Rate Per DL Hour
Expert Answer
1. Predetermined overhead rate = $172,800 / 18,000 = $9.60 per DL hour
2. Applied manufacturing overhead = Predetermined overhead rate × Actual value of allocation base
Applied manufacturing overhead = $9.60 × 1,800 actual direct labor hours = $17,280
3. Actual Manufacturing Overhead Costs = Indirect Labor + Indirect Material + Factory Rent + Factory Supervision + Factory Depreciation + Factory Janitorial Work + Factory Insurance = $2,570 + $3,310 + $3,250 + $4,840 + $5,690 + $1,140 + $1,780 = $22,580
4. Overhead = Actual Manufacturing Overhead – Applied manufacturing overhead = $22,580 – $17,280 = $5,300(Underapplied)
