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Part 1

Classic Uniforms produces uniforms. The company allocates manufacturing overhead based on the machine hours each job uses.

Classic Uniforms reports the following cost data for the past year:

Requirement 1. Compute the predetermined manufacturing overhead rate

Requirement 2. Calculate the allocated manufacturing overhead for the past year.

Requirement 3. Compute the underallocated or overallocated manufacturing overhead. How will this underallocated or overallocated manufacturing overhead be disposed of?

First calculate the preliminary manufacturing overhead balance using the T-account.

Data table

	Budget	Actual
Direct labor hours. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7,200 hours	6,100 hours
Machine hours. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6,600 hours	6,400 hours
Depreciation on salespeople's autos. . . . . . . . . . . . . . . . . . . . . . . . . . . .	$20,000	$20,000
Indirect materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$49,500	$54,500
Depreciation on trucks used to deliver uniforms to customers. . . . . .	$13,000	$11,500
Depreciation on plant and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . .	$67,000	$68,000
Indirect manufacturing labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$39,500	$42,500
Customer service hotline. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$18,500	$19,500
Plant utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$2,400	$4,900
Direct labor cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$72,500	$86,000