Bill Company and Ted Company both use predetermined overhead rates to apply manufacturing overhead to production. Bill€™s is based on machine hours, and Ted€™s is based on materials cost. Budgeted production and cost data for Bill and Ted are as follows:

At the end of the year, Bill Company had incurred overhead of $305,000 and had produced 9,800 units using 15,990 machine hours and materials costing $152,000. Ted Company had incurred overhead of $216,000 and had produced 20,500 units using 9,750 machine hours and materials costing $395,000.

Required:
1. Compute the predetermined overhead rates for Bill and Ted.
2. Was overhead over- or underapplied for each company, and by howmuch?

Transcribed Image Text:

Bill Ted Manufacturing overhead Units Machine hours Matcrials cost $304,000 $220,000 20,000 9,700 $155,000 $400,000 10,000 16,000