Question
Findley Company and Lemon Company both use predetermined overhead rates to apply manufacturing overhead to production. Findleys is based on machine hours and Lemons is
Findley Company and Lemon Company both use predetermined overhead rates to apply manufacturing overhead to production. Findleys is based on machine hours and Lemons is based on materials cost. Budgeted production and cost data for Findley and Lemon are as follows:
Findley Lemon Manufacturing overhead $912,000 $990,000 Units produced 0,000 60,000 Machine hours 48,000 33,750 Materials cost $450,000 $1,800,000
At the end of the year, Findley Company had incurred overhead of $915,000 and had produced 19,600 units using 47,780 machine hours and materials costing $445,000. Lemon Company had incurred overhead of $972,000 and had produced 61,500 units using 32,650 machine hours and materials costing $1,777,500.
a. Compute the predetermined overhead rates for Findley Company and Lemon Company.
b. Was overhead over or under applied for each company, and by how much?
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