Con-Aggie Manufacturing Company is studying the results of applying factory overhead to production.
The following data have been used:
estimated factory overhead: $60,000;
estimated materials costs, $50,000;
estimated direct labor costs $60,000;
estimated direct labor hours 10,000;
estimated machine hours 20,000;
work in process at the beginning of the month, none.
The actual factory overhead incurred for the month of November was $75,000, and the production statistics on November 30 are as follows:
Job 101:
Materials Cost $5,000;
Direct Labor Costs $6,000;
Direct Labor Hours 1,000;
Machine Hours 3,000;
Date Jobs Completed November 10.
Job 102:
Materials Cost $7,000;
Direct Labor Costs $12,000;
Direct Labor Hours 2,000;
Machine Hours 3,200;
Date Jobs Completed November 14.
Job 103:
Materials Cost $8,000;
Direct Labor Costs $13,500;
Direct Labor Hours 2,500;
Machine Hours 4,000;
Date Jobs Completed November 20.
Job 104:
Materials Cost $9,000;
Direct Labor Costs $15,600;
Direct Labor Hours 2,600;
Machine Hours 3,400;
Date Jobs Completed: In process.
Job 105:
Materials Cost $10,000;
Direct Labor Costs $29,000;
Direct Labor Hours 4,500;
Machine Hours 6,500;
Date Jobs Completed November 26.
Job 106:
Materials Cost $11,000;
Direct Labor Costs $2,400;
Direct Labor Hours 400;
Machine Hours 1,500;
Date Jobs Completed: In process.
1. Compute the predetermined rate, based on the following: a. direct labor cost, b. direct labor hours, c. machine hours.
2. Using each of the methods, compute the estimated total cost of each job at the end of the month.
3. Determine the under- or overapplied factory overhead, in total, at the end o fthe month under each of the methods.
4. Which method would you recommend, and why?