Question: Calculating Departmental Overhead Rates and Applying Overhead to Production At the beginning of the year, Tecknik Company estimated the following:
Assembly Department Testing Department Total
Overhead $435,000 $720,000 $1,155,000
Direct labor hours 145,000 30,000 175,000
Machine hours 80,000 120,000 200,000
Tecknik uses departmental overhead rates. In the assembly department, overhead is applied on the basis of direct labor hours. In the testing department, overhead is applied on the basis of machine hours. Actual data for the month of March are as follows:
Assembly Department Testing Department Total
Overhead $38,500 $76,500 $115,000
Direct labor hours 13,000 1,680 14,680
Machine hours 6,800 13,050 19,850
Required: 1. Calculate the predetermined overhead rates for the assembly and testing departments.
2. Calculate the overhead applied to production in each department for the month of March.
3. By how much has each department's overhead been overapplied? Underapplied?