Information: Tipsy Topper Company uses labor hours to allocate overhead to it's jobs, building custom dog villas.For the coming year they estimate that total overhead will be $18,400,000.They are highly automated, with relatively low labor costs. They have estimated that they will have labor costs around $1,600,000 next year, using 80,000 labor hours. Their machine hours are much more, about 600,000 hours. At the end of the year, their accountant, Monte Mortifer Mumps, has reported that actual overhead was $17,640,000 and that labor hours were 72,000, with labor cost of $1,368,000 and that machine hours were 620,000.

Questions: 1) Prepare a meaningful report for upper management explaining to them the adjustment required to state overhead at the proper amount for the year. You will want to have clearly shown how you got to your adjustment, the calculation of the overhead rate for the year, the application of the rate, by how much overhead was over or under applied, and the effect of the adjustment on income.

2) At the meeting Management was particularly interested in one of the major jobs, a dog villa for Dr. Dudley. You had records of the material cost ($184,000) and labor ($60,000), but no record of overhead. Thinking quickly you asked for a moment to prepare a report they could take with them. This gave you time to calculate the overhead applied.You put together the report showing material, labor and overhead applied. Everyone was happy. Clearly show your report -- including how you calculated the overhead applied.

clue from teacher: Do you have enough information to calculate the applied overhead to this job?Well, no, not right in front of you. Here's some hints:First you only need two numbers to calculate the applied overhead. You calculated one of them answering question #1.So you only really need one number more.You don't have that. But you do have a clue.The clue is that you can determine that number by looking at labor costs on the Dudley job, and how many hours are in that number.That gives you the labor hourly rate, right?You can use the labor hourly rate to get that number you want. If you cant figure it out -- make up a number, anything between $1/hour and $100 per hour and use that.