P 3. Natural Cosmetics Company applies overhead costs on the basis of machine hours. The overhead rate is computed by analyzing data from the previous year to determine the percentage change in costs. Thus, this year’s overhead rate will be based on the percentage change multiplied by last year’s costs.

Last Year Machine hours 57,360 Overhead costs Indirect labor $ 23,530 Employee benefits 28,600 Manufacturing supervision 18,480 Utilities 14,490 Factory insurance 7,800 Janitorial services 12,100 Depreciation–factory and machinery 21,300 Miscellaneous overhead 7,475 Total overhead $133,775 This year the cost of utilities is expected to increase by 40 percent over the previous year; the cost of indirect labor, employee benefits, and miscellaneous overhead is expected to increase by 30 percent over the previous year; the cost of insurance and depreciation is expected to increase by 20 percent over the previous year; and the cost of supervision and janitorial services is expected to increase by 10 percent over the previous year. Machine hours are expected to total 68,832.

Required 1. Compute the projected costs and the overhead rate for this year, using the information about expected cost increases. (Carry your answer to three decimal places.)

2. Jobs completed during this year and the machine hours used were as follows:

Job No. Machine Hours 2214 12,300 2215 14,200 2216 9,800 2217 13,600 2218 11,300 2219 8,100 Determine the amount of overhead to be applied to each job and to total production during this year. (Round answers to whole dollars.)

3. Actual overhead costs for this year were $165,845. Was overhead underapplied or overapplied? By how much? Should the Cost of Goods Sold account be increased or decreased to reflect actual overhead costs?
Allocation of Overhead