Lund Products, Inc., uses a predetermined overhead rate in its production, assembly, and testing departments. One rate

Question:

Lund Products, Inc., uses a predetermined overhead rate in its production, assembly, and testing departments. One rate is used for the entire company; it is based on machine hours. The rate is determined 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. Lise Jensen is about to compute the rate for this year using the following data: image text in transcribed

This year the cost of indirect materials is expected to increase by 30 percent over the previous year. The cost of indirect labor, utilities, machinery depreciation, property taxes, and insurance is expected to increase by 20 percent over the previous year. All other expenses are expected to increase by 10 percent over the previous year. Machine hours for this year are estimated at 45,980.
Required 1. Compute the projected costs and the overhead rate for this year using the information about expected cost increases. (Round your answer to three decimal places.)
2. During this year, Lund Products completed the following jobs using the machine hours shown: image text in transcribed

Determine the amount of overhead applied to each job. What was the total overhead applied during this year? (Round answers to the nearest dollar.)
3. Actual overhead costs for this year were $234,485. Was overhead underapplied or overapplied this year? By how much? Should the Cost of Goods Sold account be increased or decreased to reflect actual overhead costs?
4. At what point during this year was the overhead rate computed? When was it applied? Finally, when was underapplied or overapplied overhead determined and the Cost of Goods Sold account adjusted to reflect actual costs?

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