Question:
(Predetermined OH rates) Lansing Mfg. prepared the following 2010 abbreviated flexible budget for different levels of machine hours:
|
40,000
|
44,000
|
48,000
|
52,000
|
|
Variable manufacturing overhead
|
$ 80,000
|
$ 88,000
|
$ 96,000
|
$104,000
|
|
Fixed manufacturing overhead
|
325,000
|
325,000
|
325,000
|
325,000
|
Each product requires 4 hours of machine time, and the company expects to produce10,000 units in 2010. Production is expected to be evenly distributed throughout the year.
a. Calculate separate predetermined variable and fixed OH rates using as the basis of application (1) units of production and (2) machine hours.
b. Calculate the combined predetermined OH rate using (1) units of product and (2) machine hours.
c. Assume that all actual overhead costs are equal to expected overhead costs in 2010, but that Lansing Mfg. produced 11,000 units of product. If the separate rates based on units of product calculated in part (a) were used to apply overhead, what amounts of underapplied or overapplied variable and fixed overhead exist at year-end 2010?