2. Ken's Carpets sells carpet for both residential and business use. To better estimate costs, the company recently adopted an activity-based costing system. Last year, the company incurred $300,000 in overhead costs. Based on an intense study of their company, the following activities, allocation bases, and percentages of overhead costs were determined:

Activity

Allocation Base

Overhead Cost for each activity

Purchasing

# of purchase orders

75,000

Materials processing

# of square feet

150,000

Sales

# of sales orders

75,000

The number of activities for residential and business is as follows:

Allocation Base

Residential

Business

# of purchase orders

700

500

# of square feet

4,000,000

2,000,000

# of sales orders

400

100

A. Calculate the overhead rates for each of the three activities.

B. If a particular residential job requires 4 purchase orders and 1 sales order for total of 1,500 square feet of carpet, how much overhead should be allocated to the job?

3. Pioria Products assigns overhead to specific jobs based on machine hours. At the beginning of the current year, estimated overhead costs were $2,150,000 and estimated machine hours were 500,000. By the end of the year, actual overhead costs were calculated to be $2,000,000 and actual machine hours were 475,000.
						Required (Show calculations and answers below - answers in shaded, outlined cell):
A. Calculate the predetermined overhead rate.					Predetermined OH rate
B. How much overhead would be applied to a particular job that required 315 machine hours?
					Applied overhead
C. How much total overhead was applied during the year?					Applied overhead
D. By how much was overhead over- or underapplied for the year? Be sure to indicate whether it was over- or underapplied.