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Marigold Manufacturing Company, a small manufacturer of appliance parts, has just completed its first year of operations. The company's controller, George Robinson, has been reviewing
Marigold Manufacturing Company, a small manufacturer of appliance parts, has just completed its first year of operations. The company's controller, George Robinson, has been reviewing the results for the year and is concerned about the application of factory overhead. Trainor is using the following information to assess operations. Marigold uses several machines with a combined cost of $2.290,000 and no residual value. Each machine has an output of 5 units of product per hour and a useful life of 26,000 machine hours. Selected actual data on Marigold's operations for the year just ended are as follows: Products manufactured Machine use Direct labor Laborrate Total factory overhead Cost of Goods Sold Finished Goods Inventory (year-end) Work in Process Inventory year-end) 664,000 units 194,000 hours 25,000 hours $ 15 per hour $ 1.180,000 $ 1,735,060 S 433.240 $ 0 Total factory overhead is applied based on direct labor cost using a predetermined plantwiderate. Budgeted activity for the year included 10 employees each working 1.800 productive hours per year to produce 675,000 units of product. Because the machines are highly automated each employee can operate two to four machines simultaneously. Normal activity is for each employee to operate three machines. Machine operators are paid $15 per hour. Overhead was budgeted at $810.000 Based on Marigold Manufacturing Company's actual operations over the past year, was manufacturing overhead underapplied or overapplied? By how much? Round OH rate to decimal places 52%) Predetermined overhead rate of direct labor cost Overhead
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