Hunter Corporation uses ABC to determine product costs for external financial reports. At the beginning of the year, management made the following cost and activity estimates in the company's five activity cost pools:

Activity Cost Pool Activity Measure Estimated Overhead Cost Expected Activity

Labour related Direct labour-hours $405,000 45,000 DLHs

Production orders Number of orders $90,000 1,125 orders

Materials receipts Number of receipts $270,000 1,800 receipts

Relay assembly Number of relays $480,000 12,000 relays

General factory Machine-hours $1,260,000 90,000 MHs

Total $2,505,000

Required:

1. Compute the activity rate (i.e., predetermined overhead rate) for each of the activity cost pools.
2. During the year, actual overhead cost and activity were recorded as follows:

Activity Cost Pool Actual Overhead Cost Actual Activity

Labour related $418,500 48,000 DLHs

Production orders $87,000 1,050 orders

Materials receipts $285,000 1,950 receipts

Relay assembly $480,000 11,850 relays

General factory $1,270,500 91,500 MHs

Total overhead cost: $2,541,000

a) Create a journal entry to record the incurrence of actual manufacturing overhead cost for the year (credit accounts payable). Post the entry to the company's manufacturing overhead T-account.

b) Determine the amount of overhead cost applied to production during the year.

c) Create a journal entry to record the application of manufacturing overhead cost to work in process for the year. Post the entry to the company's manufacturing overhead T-account.

d) Determine the amount of underapplied or overapplied manufacturing overhead for the year.

3.The actual activity for the year was distributed among the company's four products as in the table below.

a) Determine the total amount of overhead cost applied to each product.

b) Does the total amount of overhead cost applied to the products above tie in to the T-accounts in any way? Explain your answer.

Activity Cost Pool Actual Activity Product A Product B Product C Product D

Labour related 48,000 DLHs 12,000 16,500 6,000 13,500

Production orders 1,050 orders 240 300 195 315

Materials receipts 1,950 receipts 150 690 360 750

Relay assembly 11,850 relays 4,050 -0- 7,800 -0-

General factory 91,500 MHs 19,500 27,000 21,000 24,000