Question
Swifty Company manufactures a line of lightweight running shoes. CEO Mark Swifty estimated that the company would incur $3,692,400 in manufacturing overhead during the coming
Swifty Company manufactures a line of lightweight running shoes. CEO Mark Swifty estimated that the company would incur $3,692,400 in manufacturing overhead during the coming year. When Swifty Company uses direct labor hours as its manufacturing overhead application base, predetermined overhead rate is $15.45/DLH and when it uses machine hours as its manufacturing overhead application base, predetermined overhead rate is $7.24/MH. Additionally, he estimated the company would operate at a level requiring 238,990 direct labor hours and 510,000 machine hours. At the end of the year, Swifty Company had worked 214,000 direct labor hours, used 348,000 machine hours, and incurred $2,523,000 in manufacturing overhead.
1. If Swifty Company used direct labor hours as its manufacturing overhead application base, how much overhead was applied to jobs during the year?
2. Using direct labor hours as the application base, was manufacturing overhead under- or overapplied for the year? By how much?
3. If Swifty Company used machine hours as its manufacturing overhead application base, how much overhead was applied to jobs during the year?
4. Using machine hours as the application base, was manufacturing overhead under- or overapplied for the year? By how much?
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