Andrew Rush, the accountant for christensen LTD , is in the process of analysing the companys overhead costs for November. he has gathered the following data for the month:

Labour:
Direct labour hours:
project no. 12: small wombats	2 600
Project no. 13: large deers	3 000
Project no. 14: small dogs	2 400
Labour costs:
Direct labour wages	$160 000
Indirect labour wages (2 000 hours)	20 000
Supervisory salaries	12 000
Inventories, 1 November:
Direct material and supplies	$ 10 500
Work in process (project no. 12)	54 000
Finished goods	112 500
Purchases of direct material and supplies:
Direct material	$135 000
Supplies (indirect material)	15 000
Direct material and supplies requisitioned for production:
project no. 12	$45 000
project no. 13	37 500
project no. 14	25 500
Supplies (indirect material)	12 000
Total	$120 000
Production equipment costs:
Power	$ 4 100
Repairs and maintenance	1 500
Depreciation	1 500
Other	1 000
Total	$ 8 100
Other costs:
Building occupancy costs (heat, light, depreciation etc.):
Factory facilities	$ 8 400
Sales offices	2 600
Administrative offices	2 000
Total	$ 13 000

The job costing system used by the firm uses direct labour hours as the overhead cost driver. In November of the previous year, rush had prepared the following budget for direct labour and manufacturing overhead costs for the coming year. The plant is capable of operating at 135 000 direct labour hours per year. However, rush estimates that the normal usage is 120 000 hours in an average year.

	Manufacturing overhead budget
Direct labour hours	Variable	Fixed
100 000	$600 000	$216 000
120 000	720 000	216 000
140 000	840 000	216 000

During November the following jobs were completed:

(a) Project number 12: small wombats

(b) job number 13: large deers.

Required

1. Construct an Excel spreadsheet to:

i) Calculate the predetermined overhead rate for the current year, using as denominator volumes:

A) practical capacity

B) normal volume.

ii) Calculate the total cost of job number 77, using both overhead rates calculated in part (a).

iii) Calculate the amount of manufacturing overhead applied to job number 78 during November, using both overhead rates.

2. What was the total amount of manufacturing overhead applied during November, using both overhead rates?

3. Use your spreadsheet to:

i) Calculate the actual manufacturing overhead incurred during November.

ii) Calculate the overapplied or underapplied overhead for November, using both overhead rates. Explain the differences.

4. Which of these denominator volumes is likely to result in accurate estimates of product costs? Explain.