Karol Company and Jason Company both use predetermined overhead rates to apply fac¬

tory overhead to production. Karol's is based on machine hours and Jason's is based on ma¬

terials cost. Budgeted production and cost data for Karol and Jason are as follows:

At the end of the year, Karol Company had incurred overhead of $418,000 and had pro¬
duced 9,800 units using 15,990 machine hours and materials costing $147,000. Jason Company had incurred overhead of $236,000 and had produced 20,500 units using 7,550 ma¬
chine hours and materials costing $395,000.
Required:
1. Compute the predetermined overhead rates for Karol and Jason.
2. Was overhead over- or underapplied for each company, and by how much?

Transcribed Image Text:

Manufacturing overhead Units Machine hours Material cost Karol Jason $416,000 $240,000 10,000 20,000 16,000 7,500 $150,000 $400,000