The expected costs and operating data for two manufacturers are presented below: Aloe Ltd Basil Ltd Units

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The expected costs and operating data for two manufacturers are presented below:




Aloe Ltd


Basil Ltd

Units produced

Factory overhead costs

Direct labour hours

Direct labour cost


104 000

$499 200

151 600

$996 000


83 960

$888 160

164 000

$803 600


Aloe Ltd applies factory overhead on the basis of units of production, whereas Basil Ltd uses direct labour hours. During the last financial year, Aloe Ltd produced 109 600 units and incurred factory overhead costs of $528 000, and Basil Ltd’s overhead costs were $860 000, using 174 000 direct labour hours.


Required

A. Calculate the predetermined factory overhead rate for each company.

B. Indicate whether factory overhead was overapplied or underapplied for each company, and by how much.

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Accounting

ISBN: 978-1118608227

9th edition

Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett

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