Predetermined overhead rate is used to apply manufacturing overhead to products or job orders and is usually computed at the beginning of each period by dividing the estimated manufacturing overhead cost by an allocation base (also known as activity base or activity driver). Commonly used allocation bases are direct labor hours, direct labor dollars, machine hours, and direct materials cost incurred by the process.

## Formula:

As stated earlier, the predetermined overhead rate can be derived by dividing the manufacturing overhead cost estimated (or budgeted) at the start of the period by the estimated units in allocation base. The formula can be written as follows:

## Examples

### Example 1:

Suppose GX company uses direct labor hours to assign manufacturing overhead cost to job orders. The budget of the GX company shows an estimated manufacturing overhead cost of \$8,000 for the forthcoming year. The company estimates that 1,000 direct labors hours will be worked in the forthcoming year.

Using the above information, we can compute the predetermined overhead rate as follows:

Predetermined overhead rate = Estimated manufacturing overhead cost/Estimated total units in the allocation base
Predetermined overhead rate = \$8,000/1,000 hours
= \$8.00 per direct labor hour

Notice that the formula of predetermined overhead rate is entirely based on estimates. The overhead applied to products or job orders would, therefore, be different from the actual overhead incurred by jobs or products. This difference is eliminated at the end of the period. The elimination of difference between applied overhead and actual overhead is known as disposition of over or under-applied overhead.

### Example 2

Albert Shoes Company calculates its predetermined overhead rate on the basis of annual direct labor hours. At the beginning of year 2021, the company estimated that its total manufacturing overhead cost would be \$268,000 and the total direct labor cost would be 40,000 hours. The actual total manufacturing overhead incurred for the year was \$247,800 and actual direct labor hours worked during the year were 42,000.

Required:

1. Calculate Albert’s predetermined overhead rate for the year 2021.
2. Find the amount of manufacturing overhead cost that Albert would have applied to its units of product.

#### Solution

Estimated manufacturing overhead/Estimated direct labor hours
= \$268,000/40,000 hours
= \$6.7 per direct labor hours

2. Manufacturing overhead applied to products:

Actual direct labor hours worked x Predetermined overhead rate
= 42,000 hours x \$6.7
= \$281,400

### Example 3

The estimated operating and cost data for three different companies is given below:

The allocation bases used by above three companies for computing their predetermined overhead rates are:

• Company A: Direct labor hours
• Company B: Machine hours
• Company C: Direct materials cost

Required: Compute predetermined overhead rate for each of the above three companies.

#### Solution

Company A:

Estimated manufacturing overhead cost/Estimated direct labor hours
\$1,072,000/160,000 hours
= \$6.7

Company B:

Estimated manufacturing overhead cost/Estimated machine hours
= \$630,000/140,000 hours
= \$4.5

Company C:

Estimated manufacturing overhead cost/Estimated direct materials cost
= \$960,000/\$600,000
= \$1.6

A D V E R T I S E M E N T

## Multiple or departmental predetermined overhead rates:

The predetermined overhead rate computed above is known as single or plant-wide overhead rate which is mostly used by small companies. In large ones, each production department computes its own rate to apply overhead cost. The use of multiple predetermined overhead rates may be a complex and time consuming task but is considered a more accurate approach than applying only a single plant-wide rate.

According to a survey 34% of the manufacturing businesses use a single plant wide overhead rate, 44% use multiple overhead rates and rest of the companies use activity based costing (ABC) system.

### Example 4

The Blue Company uses a job order costing system and computes separate predetermined overhead rates for its cutting and finishing departments. The following estimates were made at the beginning of the year 2021:

Cutting department:

• Direct labor hours: 6,000 hours
• Machine hours: 48,000 hours
• Direct labor cost: \$50,000

Finishing department:

• Direct labor hours: 30,000 hours
• Machine hours: 5,000 hours
• Direct labor cost: \$270,000

The overhead rate of cutting department is based on machine hours and that of finishing department on direct labor cost.

Required: Work out predetermined overhead rate for each of the above two departments.

#### Solution

Cutting department:

Estimated manufacturing overhead cost/Estimated machine hours
= \$360,000/48,000 hours
= \$7.5 per machine hour

Finishing department:

Estimated manufacturing overhead cost/Estimated direct labor cost
= \$486,000/\$270,000
= \$1.8 per dollar of direct labor

In finishing department, the company would apply \$1.80 of manufacturing overhead for each dollar of direct labor cost incurred by the department. To state it another way, we can say that the manufacturing overhead would be applied @ 180% (= 1.80 x 100) of direct labor cost.

More from Job-order costing system (explanations):
A D V E R T I S E M E N T
1. Bon Bagayi

Thanks for this description of the PDOHR. now I have this problem, and I seem not to be able to apply the formula you have just described. here is:
Departments
Acut Bmach Asst tot plant
Direct Mat. 1200 90 560 90000
Direct labor 650 170 1300 2120

on the basis of direct labor cost.Determinine the manufacturing overhead cost that would have been applied
how do I compute the rate for each department?

Total of direct material or direct labour will give you manufacturing cost. Then, divide the amount of MOH cost to Direct labour. It would give you predetermined overhead rate. Therefore, you would multiply that rate with direct labour since the company uses direct labour cost as allocation base. The amount after multiplication would be applied MOH cost.

2. Tina Bonne

Manufacturing overhead is \$420,000, and total machine hours are 60,000. Do I divide machine hours by manufacturing overhead to get the predetermined overhead rate?

3. Accounting For Management

If \$420,000 is estimated manufacturing overhead cost for a period and the company uses machine hours as the activity driver (see first paragraph of the main article), then you need to divide \$420,000 by 60,000 hours. The predetermined overhead rate would be \$7.00 per machine hour as calculated below:

= \$420,000/60,000
= \$7 per machine hour

I repeat that the estimated, not actual, manufacturing overhead (also known as factory overhead) is used to calculated predetermined overhead.

1. I need help. problem? Compute the predetermined Overhead Rate.
Beginning of the year estimated 20,000 direct labor hours required for the period for production, \$94,000 fixed manufacturing overhead expenses for the upcoming period and variable manufacturing overhead \$2.00 per direct labor-hour. The actual manufacturing overhead for the year was \$123,900 and actual total direct labor was 21,000 hours. compute predetermined overhead rate for the year.

1. never mind i figured it out, but thanks anyway

4. if the ques. states that it has more than one departments, eg. an assemble dept and gives m/overhead,DLC, DLL,and machine hours. how do i calculate the overhead rate for the assembly dept.?

5. Problem:
Estimated direct labor cost and total manufacturing overhead to be \$60,000 and \$45,000 respectively. During the period, the company incurred actual manufacturing overhead cost of \$52,000 and \$71,000 of direct labor cost.

Is this correct? \$45,000/\$60,000 =0.75 or 75% for Predetermined Overhead Rate

or should 75% is given in the problem?

1. Sreyphos

A company expected its annual overhead costs are expected to be \$600,000 and direct labor costs to be \$1,000,000. Actual overhead was \$580,000, and actual labor costs totaled \$1,100,000. How much is the companys predetermined overhead rate ? How to calculate it ?

6. Accounting For Management

It is correct.

Companies can use direct labor cost as denominator if it is the best allocation base for them.

7. imran shaheen

If Budgeted overhead is given, lets say:
Machine hours=65
Labor hours=90
then what will be the rate for both machine hours and labor hours?

1. Accounting For Management

(1) 778/65 = 11.97 per machine hour
(2) 778/90 = 8.64 per direct labor hour

8. johnnyfeced

Hi there! thank you so much. I learned a lot. 🙂 I have a question. job no. 629 was sold at a gross margin of 50% or for 36,000. Its cost includes direct materials of 8,000 with factory overhead applied at 60% of direct labor cost. How much factory overhead was charged to the job? Thanks a lot, God bless you. 🙂

9. Accounting For Management

Sale price = 36,000
Gross margin = 50%
Sales = Cost + Profit
150% = 100% + 50%
Cost of the job = (36,000/150)*100 = 24,000
Direct materials cost = 8,000
Direct labor and factory overhead cost = 24,000 – 8,000 = 16,000
160% = 100% + 60%
Direct labor = (16,000/160)*100 = 10,000
Factory overhead = 16,000 – 10,000 = 6,000

10. hi,

I have a question, what would be the predetermined overhead rate. If
the Estimated machine hours
85,000
\$5.55 per machine hour
\$951,888

1. Octave oxon

1419388

11. The FOH rate is 11.2 (rounded off)
machine hours is for fixed and the direct labor hours is for variable so \$951,888/85000

12. I think it’s

1,423,638/85000= \$16.75 per machine hours 🙂

13. Accounting For Management

bambam seems to be accurate.

14. i have questions:
below are partial data for overhead costs and activity levels for three different companies.

Items A B C
Budgeted MOH 1,600,000 1,800,000 1,500,000
Actual MOH 1,744,000 ? 1,486,000
Applied OH 1,715,200 1,764,000 ?
Budgeted level of Activity 500,000 DLH 400,000 DLH ?
Actual level of Activity ? 392,000 DLh 620,000 DLH
Underapplied ? (46,800) (64,000)
(overapplied) OH

…how can i find those missing values for each companies.

15. I do not understand why do we relate direct labor costs (direct labor hours) to indirect production costs (fixed manufacturing overhead).

16. yes jin,,,,,,75% is correct…. who can explain for me the difference between over-applied overhead and under-applied overhead.

17. Accounting For Management
18. How can I calculate a plantwide predetermined overhead rate based on direct labor hours ?
tnx

19. Anannya

I have a question.160% of 16000=10000 how its possibble.and when it happen.pls explan.

20. Accounting For Management

16,000 is the conversion cost (direct labor + FOH.)
FOH is 60% of direct labor. So

Direct labor = (16,000/160)*100
and
FOH = (16,000/160)*60

21. Noraima

Hi,

I need some guidance. I have tried to figure this out and am so lost I can’t figure it out.
I am looking for the predetermined manufacturing overhead rate for each department.

Dept. 1
MOH 1,800,000
Direct manufacturing labor cost 1400000
machine hours 50000

dept. 2
MOH 3,600,000
Direct manufacturing labor cost 2,000,000
machine hours 200,000

22. Hi how do you answer this.
Marvin company’s estimated factory overhead for the year was p456120 and the actual overhead was p470800. Machines hours were used in determining factory overhead application rate. There were 84500 actual machines and 81450 estimated machine houra during the day.
Prepare journal entries to record:
The closing of the applied overhead account and actual factory account

Thankyou

23. ELIZABETH

I am given information as follows:
engine parts
shop direct labor
shop and repair equipment depreciation
shop supervisor salaries
shop property tax
shop supplies
and total costs and expenses

direct labor rate is given also.

How do I figure the predetermined shop overhead rate per direct labor hour?
PLEASE someone clarify this for me
Thank you

24. Barbara

fabricating machining assembly total plant
direct labor \$203,000 \$101,500 \$304,500 \$609,000

department
direct materials \$3,300 \$200 \$1,700 \$5,200
direct labor \$3,400 \$500 \$6,500 \$10,400

assuming use of a plantwide overhead rate to apply manfacing overhead rate to jobs:

1. compute rate for the current year
2. determine the amt to listed job

25. Hi,
Can someone help me with this question:
See below…
Setup (1,000 setup hours) \$136,000
Production scheduling (400 batches) 70,000
Production engineering (60 change orders) 60,000
Supervision (2,000 direct labor hours) 60,000
Machine maintenance (12,000 machine hours) 108,000
Total activity costs \$434,000

The following additional data were provided for Job 845:

Direct materials costs \$7,000
Direct labor cost (5 Milling direct labor hours;
35 Finishing direct labor hours) \$1,000
Setup hours 5 hours
Production scheduling 1 batch
Machine hours used (25 Milling machine hours;
5 Finishing machine hours) 30 hours
Production engineering 3 change orders

Calculate the cost of Job 845 using the plantwide overhead rate based on machine hours.

26. Daniella RIvera

This is was very helpful thank you ! I understand how to get the predetermined overhead rate, however I am confused with a problem I am given. It gives me DM and DL, but no overhead costs. All it says overhead is applied at a rate of 120% of DL, jobs are sold at 60% and admin expense was 2950. the Beginning balance was 0 and that Job 12 were 16 are sold, but the customer who ordered Job 14 decided he did not want the slide so it is still in the warehouse. It asks for the finished goods, but I do not how to find it without the O/h rate.If you have any tips on how to go about this that would be very helpful! thank you!
Here is the data
9/1 Balance
job 12-\$615
job 13-\$830
job 14-\$945
job 15- no number given
Job 16- no number given
Direct materials
job 12-750
job 13-235
job 14-1,280
job 15-\$200
job 16-\$915
Direct labor
job 12-420
job 13-115
job 14-560
job 15-320
job 16-87

27. Andy Gee

Great question shaheen

28. Xavier

Hi

Need to calculate predetermined rate where budgeted overhead rate is \$462,000 and budgeted total direct labour hours is 21,000. how do i get the overhead rate in percentage

29. Hello.. just learn this slybus..can someone help me..
Variable overhead cost per direct labor hour…………. \$2
Total Fixed overhead cost per year……………………\$250,000
Budgeted Standart direct labour(denominator lvl of act)…. 40,000
Actual Direct Labour Hours…………………………… 39,000
Standard direct labour hour allowed for the actual output.. 38,000

Compute the predetermine overhead rate for the year?

30. I was wondering a bit.. are manufacturing overhead costs consist of variable and fixed overhead?

31. Hi
I’m still waiting for a response .
Thanks

32. hii… i have a problem here. can anybody help me solve this out?
qtn says a company manufactures 2 product 1 &2.
To determine the amount of overhead to assign to each product line, following information are given.

Product 1
-estimated wheel produce 45000
-direct labor hrs/wheel is 1

product 2
-estimated wheel produce 20000
-direct labour hrs/wheel is 2
total estimated overhead cost for the two product line is \$700,000.
required: compute the overhead costs assigned to the priducts assuming labour hours is used to allocate overhead cost.

how will i compute it.?

33. Sawyer Manufacturing Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, the Corporation worked 48,000 actual direct labor-hours and incurred \$552,000 of actual manufacturing overhead cost. The Corporation had estimated that it would work 46,000 direct labor-hours during the year and incur \$506,000 of manufacturing overhead cost. The Corporation’s manufacturing overhead cost for the year was:???

34. Everlyn

I have a question which is on how to make journal entries on applied factory overhead based on machine hours, \$37000?

36. pls can some one help me in this question plsss
On August 1, Cimino Company had the following balances in its inventory accounts
Materials Inventory \$16,350
Work-in-Process Inventory 21,232
Finished Goods Inventory 15,200
Work-in-process inventory is made up of three jobs with the following costs:

Job 30 Job 31 Job 32
Direct materials \$2,650 \$1,900 \$3,650
Direct labor 1,900 1,340 4,000

During August, Cimino experienced the following transactions:
a. Purchases materials on account for \$21,000.
b. Requisitioned materials: Job 30, \$12,500; Job 31, \$11,200; and Job 32, \$5,500.
c. Collected and summarized job tickets: Job 30, 250 hours at \$12 per hour; Job 31,
275 hours at \$15 per hour; and Job 32, 140 hours at \$20 per hour.
d. Applied overhead on the basis of direct labor cost.
f. Completed and transferred Job 31 to the finished goods warehouse.
g. Shipped Job 31 and billed the customer for 130 percent of the cost.

Required:
1. Prepare a physical flow schedule.
2. Calculate equivalent units of production for:
a. Direct materials
b. Conversion costs
3. Calculate unit costs for:
a. Direct materials
b. Conversion costs
c. Total manufacturing
4. Provide the following information:
a. The total cost of units transferred out
b. The journal entry for transferring costs from plate cutting to welding
c. The cost assigned to units in ending inventory

Can i please have a comprehensive article.on activity based costing ?

37. sorry the above required is not for these question. the right one is this:::::—–
Required:
1. Calculate the predetermined overhead rate based on direct labor cost.
2. Calculate the ending balance for each job as of August 31.
3. Calculate the ending balance of Work in Process as of August 31.
4. Calculate the cost of goods sold for August.
5. Assuming that Cimino prices its jobs at cost plus 30 percent, calculate the price of the one job that was sold during August. (Round to the nearest dollar.)

38. Sharma

Hi all ,
can somebody help me to know , what factors should be considered in selecting the base to be used in calculating the predetermined factory overhead rate. What would happen to factory overhead rates based on the direct labour hours when automated equipment is used intensively ????

Thanks

39. Hi! I have a problem and I’m very confused:

Job 31 has a direct materials cost of \$390 and a total manufacturing cost of \$1,260. Overhead is applied to jobs at a rate of 200 percent of direct labor cost.

How am I suppose to find the Manufacturing Overhead and the Direct Labor cost with just that information?

40. Accounting For Management

Total manufacturing cost = Direct materials + Direct labor + Manufacturing overhead
Suppose Direct labor = X; Manufacturing overhead = 2X (double or 200% of DL)
1,260 = 390 + X + 2X
1260 – 390 = 3X
X = 870/3
X = 290
Direct labor = 290
and manufacturing overhead is 200% of direct labor so it is 2*290 = 580

41. hi. any one can help me?
how to calculate for this question.
predetermined overhead rate at the beginning of the year Machine-hours 75,000 Manufacturing overhead cost \$900,000
during the year Machine-hours 60,000 manufacturing overhead cost \$850,000

42. plz can you explain me how to compute percentage of FOH which is based on direct labor.

43. Hi, How are you?
Am having problems to compute predeterminded manufacturing overhead rate

44. Gina Heart

Need help please! Hve no ideal how to work this problem Dinklemyer Corporation uses direct labor hours as its single cost driver. Actual overhead costs and actual direct labor hours for the first five months of the current year are as follows;
Actual Total Overhead Actual Direct Labor Hours
January \$ 975,000 19,250
February 950,000 18,400
March 860,000 17,000
April 700,000 12,375
May 760,000 13,200
Compute the company’s estimated variable manufacturing overhead cost per DHL.

45. Hey can someone please help me ASAP. To determine the cost of a job, should i use the predetermined overhead rate or calculate the actual overhead rate?

46. I have a question, What would my Predetermined OH rate be for this setup?
Exhibit 1
Product Profitability Analysis

Valves Pumps Flow Controllers
Standard Unit Cost \$37.56 \$63.12 \$56.50
Target Selling Price \$57.78 \$97.10 \$86.96
Planned Gross margin % 35% 35% 35%
Last Month
Actual Selling Price \$57.78 \$81.26 \$97.07
Actual Gross Margin 35% 22% 42%

Exhibit 2
Monthly Production and Cost Summary

Product Lines Valves Pumps Flow Controllers
Montly Production 7,500 Units 12,500 Units 4,000 Units
(1 Run) (5 Runs) (10 Runs)
Monthly Shipments 7,500 Units 12,500 Units 4,000 Units
(1 Shipment) (7 Shipments) (22 Shipments

Material and labor Costs Monthly Total
Material 4 Components 5 Components 10 Components
2 @ \$ 2 = \$ 4 3 @ \$ 2 = \$ 6 4 @ \$ 1 = \$ 4
2 @ 6 = 12 2 @ 7 = 14 5 @ 2 = 10
1 @ 8 = 8
Totals \$16.00 \$20.00 \$22.00 \$458,000.00

Labor (\$ 16,00 per hour including employee benefits)

Set – up labor 8 hours per production run 8 hours per production run 12 hours per production run 168 hours
Run Labor .25 hours per unit . 50 hours per unit .40 hours per unit 9,725 hours
Machine Hours .50 hour per unit .50 hours per unit .20 hours per unit 10,800 hours

Receiving \$20,000.00
Materials handling \$200,000.00
Engineering \$100,000.00
Packing and shipping \$60,000.00
Maintenance \$30,000.00
Machine depreaciation (10 Year Life) \$270,000.00
Total \$680,000.00

I was thinking I take 680,000 and divide by machine hours but I am not sure. I have to come up with the actual costs for it all. \

Can anyone help out?
Thanks

47. mansoor

I have an assignment as case study on Activity Based Costing,

plz if anyone can help contact me on my email:

[email protected]

S Kumar Ltd manufactures water tanks for different sizes for use by industrial customers. The company uses a job costing system, in which manufacturing overhead is applied on the basis of direct labour dollar. The company’s budget for the current year included the following predictions:

Budgeted Total direct labour hours 21, 000
Budgeted hourly direct labour rate \$20

During June, the firm began two production jobs:
• Job number T81, consisting of 87 water tanks (Standard size).
• Job number C40, consisting of 100 water tanks (mini size).

The events of June are described below:

a) 1,000 square meters of rolled aluminium sheet metal were purchased for \$6,000 on account.

b) 400 kilograms of aluminium tubing were purchased on account for \$5,500.

c) The following requisitions were filed on 5 June:

• Requisition number 112: 260 square meters of aluminium sheet metal (for job number C40) @ \$5.60 per square meter.

• Requisition number 113: 1,100 kilograms of aluminium sheet metal (for job T81) @ \$9 per kilogram.

• Requisition number 114: 10 liters of superb glue @ \$15 per liter.
All aluminuim used in production is treated as direct material. Superb glue is an indirect material.

d) An analysis of labour time sheets revealed the following labour usage for June:
• Direct labour: job number C40, 850 hours @ \$20 per hour
• Direct labour: job number T81, 950 hours @\$20 per hour
• Indirect labour: general factory clean up, \$5,500
• Indirect labour: factory supervision salaries \$8,500

e) Depreciation of the factory building and equipment during June amounted to \$12,000.
f) Rent paid in cash for warehouse space used during June was \$1,330.
g) Electricity costs incurred during June amounted to \$2,400. The invoices for these costs were received, but only half of the bill was paid in June.
h) June council rates and property taxes on the factory were paid in cash \$2,370.
22
i) The insurance cost covering factory operations for the Month of June was \$2,500. The insurance policy has been prepaid.
j) The costs of salaries and on-costs for sales and administrative personnel paid in cash during June amounted to \$8,500.
k) Depreciation on administrative office equipment and space amounted to \$4,500.
l) Other selling and administrative expenses paid in cash during June amounted to \$1,150.
m) Job number C40 was completed during June.
n) 75% of the water tanks in job number C40 were sold on account during June for \$750 each.

The 1 June balances in selected accounts are as follows: Cash \$11,000
Accounts receivable 20,000
Prepaid insurance 7,500
Raw material inventory 150,000
Manufacturing supplies inventory 600
Work in process inventory 89,000
Finished goods inventory 223,000
Accumulated depreciation: Buildings and Equipment 99,000
Accounts payable 14,500
Wages payable 8,500

Requirements:

1. Calculate the company’s predetermined overhead rate for the current year.

2. Complete the job cost sheets for job number C40 (Round-off unit cost to the nearest cent and where necessary, show ALL relevant workings.

3. Prepare journal entries to record the events of June. (Where appropriate, show ALL relevant workings. Ignore narrations.)

4. Calculate the over-applied or under-applied overhead for June. Prepare a journal entry to close this balance in the cost of goods sold. (Show calculation for actual and applied overhead.)

5. Prepare a schedule of cost of goods manufactured for June.

6. Prepare a schedule of cost of goods sold for June.

7. Prepare an income statement for June.

49. Eveline

Hi.if direct labour hourly rate is 5.6 and manufacturing overhead rate per direct labour hour is 10. Calculate manufacturing overhead

50. help me find out solution for this question that a company makes two products the greeks and the roman .greek takes 2 labour hour and roman 5 hours. company estimated that total overheads will be 50,000 and estimated that a total of 100,000 direct labour hours will be worked…
what is What is the overhead cost per unit for Greeks and Romans respectively if overheads are absorbed on the basis of labour hours

51. Hi,

Budgeted Total direct labour hours 21, 000
Budgeted hourly direct labour rate \$20

what is the predetermined overhead rate?

52. Nemai Raralevu

S Kumar Ltd manufactures water tanks for different sizes for use by industrial customers. The company uses a job costing system, in which manufacturing overhead is applied on the basis of direct labour dollar. The company’s budget for the current year included the following predictions:

Budgeted Total direct labour hours 21, 000
Budgeted hourly direct labour rate \$20

During June, the firm began two production jobs:
• Job number T81, consisting of 87 water tanks (Standard size).
• Job number C40, consisting of 100 water tanks (mini size).

The events of June are described below:

a) 1,000 square meters of rolled aluminium sheet metal were purchased for \$6,000 on account.

b) 400 kilograms of aluminium tubing were purchased on account for \$5,500.

c) The following requisitions were filed on 5 June:

• Requisition number 112: 260 square meters of aluminium sheet metal (for job number C40) @ \$5.60 per square meter.

• Requisition number 113: 1,100 kilograms of aluminium sheet metal (for job T81) @ \$9 per kilogram.

• Requisition number 114: 10 liters of superb glue @ \$15 per liter.
All aluminuim used in production is treated as direct material. Superb glue is an indirect material.

d) An analysis of labour time sheets revealed the following labour usage for June:
• Direct labour: job number C40, 850 hours @ \$20 per hour
• Direct labour: job number T81, 950 hours @\$20 per hour
• Indirect labour: general factory clean up, \$5,500
• Indirect labour: factory supervision salaries \$8,500

e) Depreciation of the factory building and equipment during June amounted to \$12,000.
f) Rent paid in cash for warehouse space used during June was \$1,330.
g) Electricity costs incurred during June amounted to \$2,400. The invoices for these costs were received, but only half of the bill was paid in June.
h) June council rates and property taxes on the factory were paid in cash \$2,370.
22
i) The insurance cost covering factory operations for the Month of June was \$2,500. The insurance policy has been prepaid.
j) The costs of salaries and on-costs for sales and administrative personnel paid in cash during June amounted to \$8,500.
k) Depreciation on administrative office equipment and space amounted to \$4,500.
l) Other selling and administrative expenses paid in cash during June amounted to \$1,150.
m) Job number C40 was completed during June.
n) 75% of the water tanks in job number C40 were sold on account during June for \$750 each.

The 1 June balances in selected accounts are as follows: Cash \$11,000
Accounts receivable 20,000
Prepaid insurance 7,500
Raw material inventory 150,000
Manufacturing supplies inventory 600
Work in process inventory 89,000
Finished goods inventory 223,000
Accumulated depreciation: Buildings and Equipment 99,000
Accounts payable 14,500
Wages payable 8,500

Requirements:

1. Calculate the company’s predetermined overhead rate for the current year.

2. Complete the job cost sheets for job number C40 (Round-off unit cost to the nearest cent and where necessary, show ALL relevant workings.

3. Prepare journal entries to record the events of June. (Where appropriate, show ALL relevant workings. Ignore narrations.)

4. Calculate the over-applied or under-applied overhead for June. Prepare a journal entry to close this balance in the cost of goods sold. (Show calculation for actual and applied overhead.)

5. Prepare a schedule of cost of goods manufactured for June.

6. Prepare a schedule of cost of goods sold for June.

7. Prepare an income statement for June.

53. Nemai Raralevu

S Kumar Ltd manufactures water tanks for different sizes for use by industrial customers. The company uses a job costing system, in which manufacturing overhead is applied on the basis of direct labour dollar. The company’s budget for the current year included the following predictions:

Budgeted Total direct labour hours 21, 000
Budgeted hourly direct labour rate \$20

During June, the firm began two production jobs:
• Job number T81, consisting of 87 water tanks (Standard size).
• Job number C40, consisting of 100 water tanks (mini size).

The events of June are described below:

a) 1,000 square meters of rolled aluminium sheet metal were purchased for \$6,000 on account.

b) 400 kilograms of aluminium tubing were purchased on account for \$5,500.

c) The following requisitions were filed on 5 June:

• Requisition number 112: 260 square meters of aluminium sheet metal (for job number C40) @ \$5.60 per square meter.

• Requisition number 113: 1,100 kilograms of aluminium sheet metal (for job T81) @ \$9 per kilogram.

• Requisition number 114: 10 liters of superb glue @ \$15 per liter.
All aluminuim used in production is treated as direct material. Superb glue is an indirect material.

d) An analysis of labour time sheets revealed the following labour usage for June:
• Direct labour: job number C40, 850 hours @ \$20 per hour
• Direct labour: job number T81, 950 hours @\$20 per hour
• Indirect labour: general factory clean up, \$5,500
• Indirect labour: factory supervision salaries \$8,500

e) Depreciation of the factory building and equipment during June amounted to \$12,000.
f) Rent paid in cash for warehouse space used during June was \$1,330.
g) Electricity costs incurred during June amounted to \$2,400. The invoices for these costs were received, but only half of the bill was paid in June.
h) June council rates and property taxes on the factory were paid in cash \$2,370.
22
i) The insurance cost covering factory operations for the Month of June was \$2,500. The insurance policy has been prepaid.
j) The costs of salaries and on-costs for sales and administrative personnel paid in cash during June amounted to \$8,500.
k) Depreciation on administrative office equipment and space amounted to \$4,500.
l) Other selling and administrative expenses paid in cash during June amounted to \$1,150.
m) Job number C40 was completed during June.
n) 75% of the water tanks in job number C40 were sold on account during June for \$750 each.

The 1 June balances in selected accounts are as follows: Cash \$11,000
Accounts receivable 20,000
Prepaid insurance 7,500
Raw material inventory 150,000
Manufacturing supplies inventory 600
Work in process inventory 89,000
Finished goods inventory 223,000
Accumulated depreciation: Buildings and Equipment 99,000
Accounts payable 14,500
Wages payable 8,500

Requirements:

1. Calculate the company’s predetermined overhead rate for the current year.

2. Complete the job cost sheets for job number C40 (Round-off unit cost to the nearest cent and where necessary, show ALL relevant workings.

3. Prepare journal entries to record the events of June. (Where appropriate, show ALL relevant workings. Ignore narrations.)

4. Calculate the over-applied or under-applied overhead for June. Prepare a journal entry to close this balance in the cost of goods sold. (Show calculation for actual and applied overhead.)

5. Prepare a schedule of cost of goods manufactured for June.

6. Prepare a schedule of cost of goods sold for June.

7. Prepare an income statement for June.

54. Mano Rana

Plzz tell me..
Pre-determined overhead rate and the possible bases..

55. Appreciate if i can get some help with the question below I am really stuck with this.

Dina Inc. management has estimated the factory overhead cost as \$1090 variable cost and \$1430 fixed cost to make 100 units using 500 machine hours.

Required:
1. Using the above information, derive the cost equation in the form of Y = a + bx.
2. Predict the cost with 550 machine hours.
3. Compare the above method of cost estimation with engineering approach, with respect to the costs and benefits of the two approaches.

Part B
You are provided with the cost data from twelve observations of electricity, a semi-variable cost.
Volume Electricity cost
(Machine hours)
January 35000 \$65,000
February 28000 \$59,800
March 34000 \$64,100
April 42000 \$67,800
May 37000 \$70,000
June 30000 \$61,300
July 25000 \$57,800
August 22000 \$55,600
September 20000 \$54,200
October 37000 \$71,000
November 45000 \$72,000
December 41000 \$65,000
TOTAL 396000 \$763,600

Required:
1. Use scatter graph to estimate the cost equation (Y = a + bx).
2. Estimate the cost equation using high low method
3. Estimate the cost equation using regression analysis.
4. Predict the cost of electricity (using all the three methods 1-3) for the month in which 38000 machine hours are used.

hi… no one seems to have answered in a long time, but i am going to take my chances because i dont understand this at all and i need help….

3. Maddow Manufacturing is a small textile manufacturer using machine-hours as the single indirect-cost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the Patterson High School Science Olympiad Jacket job.

Company
Direct materials \$25,000
Direct manufacturing labor \$5,000
Machine-hours 50,000 mh

Patterson High School Job
Direct materials \$500
Direct manufacturing labor \$100
Machine-hours 800 mh

Required:
b. Determine the amount of manufacturing overhead costs allocated to the Patterson High School job.
c. Determine the estimated total manufacturing costs for the Patterson High School job.

here is the Answer i got: is this correct?
a. For Maddow Manufacturing, determine the annual manufacturing overhead cost-allocation rate. \$1.00 Per Direct Manufacturing labor-hour

b. Determine the amount of manufacturing overhead costs allocated to the Patterson High School job. \$800

c. Determine the estimated total manufacturing costs for the Patterson High School job. \$1400

I am not sure if i should be adding all the costs above (minus the mh) to get Actual Annual Manufacturing Overhead Costs, in order calculate Annual Manufacturing Over Head Rate. or if i should just be using Manufacturing overhead costs (\$20,000)…. please im really trying and my professor is basically leaving us out to try to only get the right answer after we submit and possibly fail our assignments…

57. Jonathan

Hi! Good Day Accounting Management! I would like to ask how to determine the predetermine overhead rate for each departments. The departments are Milling and Assembly.
Milling Assembly
Direct Labor Hours 8,000 75,000
Machine hours 60,000 3,000
Direct Labor cost &72,000 \$640,000

58. Claudia

Estimated Manufacturing overhead cost = \$800 000; and estimated direct materials to be used in production = \$500 000

The inventory accounts @ beginning and end of year where:
Raw Materials: Beginning = \$20 000 End = \$80 000
WIP: Beginning = \$150 000 End = \$70 000
Finished Goods: Beginning = \$260 000 End = \$400 000

QUESTION: Calculate predetermined overhead rate for the year:

59. S. M. Gan

hi, if you could help me with this problem…
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials used in production (not on the basis of raw materials purchased). Its predetermined overhead rate was based on a cost formula that estimated \$102,000 of manufacturing overhead for an estimated allocation base of \$85,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:

Purchase of raw materials \$ 133,000
Direct labor cost \$ 81,000
Indirect labor \$ 91,500
Property taxes \$ 8,800
Depreciation of equipment \$ 19,000
Maintenance \$ 14,000
Insurance \$ 8,500
Rent, building \$ 36,000

Beginning Ending
Raw Materials \$ 22,000 \$ 10,000
Work in Process \$ 44,000 \$ 39,000
Finished Goods \$ 68,000 \$ 57,000

Compute the predetermined overhead rate for the year.

1. Salena Harrison