The over or under applied overhead
Solid Office company manufactures tow types of CHAIRS Staff and Executive Chairs, Manufacturing overhead applied into production at a rate of 80% Per Machine Hour.
Cost information are as follows:
Staff Chair Executive chair
Direct material cost $50 $75
Direct labor cost 35 35
Budgeted volume 26000 40000
The Management is concerning to use ABC system.
Management identifies three activities:
1) Manufacturing setups .
2) Machine Processing. And
3) Product shipment.
Data pertaining to those activities are as follows:
Staff chair Executive chair
Number of setups 200 setups 70 setups
Machine hours 42000 H 55000 H
No of Shipments 300 Shipments 250 Shipments
Manufacturing overhead for the three activities are as follows:
Manufacturing setups. $1,444,000
Machine Processing. And $3,796,000
Product shipment. $1,220,000
Requirements:
1) Under normal costing compute the Manufacturing overhead Per unit for both products?
2) Calculate the over or under applied overhead for both products?
3) Under ABC system compute the Manufacturing overhead per unit for both products?
