Problem 2

Dotsero Technology, Inc., has a job-order costing system. The company uses predetermined overhead rates in applying manufacturing overhead cost to individual jobs. The predetermined overhead rate in Department A is based on machine-hours, and the rate in Department B is based on direct materials cost. At the beginning of the most recent year, the company's management made the following estimates for the year:

	Department A	Department B
Machine-hours	70,000	19,000
Direct labor-hours	30,000	60,000
Direct materials cost	$195,000	$282,000
Direct labor cost	$260,000	$520,000
Manufacturing overhead cost	$420,000	$705,000

At the end of the year, the records of Dotsero showed the following actual cost and operating data for all jobs worked on during the year:

	Department A	Department B
Machine-hours	61,000	20,000
Direct labor-hours	28,000	66,000
Direct materials cost	$156,000	$284,000
Manufacturing overhead cost	$385,000	$705,000

Required:

1. Compute the predetermined overhead rates for Department A and Department B.
2. Compute the amount of underapplied or overapplied overhead in each department at the end of the current year.