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Pretty Print Shop uses a job-order cost system and applies manufacturing overhead to jobs on the basis of direct labor costs. Selected estimated cost and
Pretty Print Shop uses a job-order cost system and applies manufacturing overhead to jobs on the basis of direct labor costs. Selected estimated cost and operating data for 20X9 are provided below: Estimates Overhead Direct Labor Hours.. Secretarial Salaries.. Rent of Print Shop Wages of Printers Insurance of Print Shop and Machinery used. Depreciation on Office Equipment Depreciation on Print Shop and Machinery1,500 ,000 S_ s 900 S 10,000 $ 28,000 s 2,500 S 600 Total At the end of 20X9, Pretty Print's cost records revealed the following selected actual cost and operating data: Actual Direct Labor Hours.... Direct Labor Costs.... Total Manufacturing Overhead Work-in-Process Inventory Finished Goods Inventory. 3,500 S 25,000 S 13,500 S 4,000 S 8,000 S 12,000 Required: 1. Compute the company's predetermined overhead rate (OHR) for 20X9. OHR 2. Compute the under-applied or over-applied overhead for 20X9. Overhead Will the over- or under-applied overhead determined in part 2 increase or decrease COGS? Why? . What effect will this have on net income? 3. Explain. 4. Why do you think the Print Shop selected DL Cost as an allocation base? Explain
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