Newstar Company has four manufacturing subsidiaries: A, B, C, and D. Each subsidiary keeps a separate set of accounting records. Manufacturing cost forecasts for 2000 for each subsidiary are:

The predetermined overhead rates for each subsidiary are based on the following:
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A: Machine hours B: Direct !abor costs C: Materials to be used D: Direct labor hours }

1. Compute the predetermined overhead rate to be used in $2(\%(\%)$ by each subsidiary:
2. If Subsidiary B actually had $\$ 8,000$ of direct labor costs and $\$ 37,500$ of manufacturing overhead, will overhead be over- or underapplied and by how much?
3. If Subsidiary C used 66,000 pounds of materials in 2000 , what will be the applied manufacturing overhead?
4. Interpretive Question: Identify the two most commonly used methods to dis pose of under- or overapplied manufacturing overhead. What is the major advantage of each method?

Transcribed Image Text:

Subsidiaries A B C D Materials to be used (lbs.). 80,000 80,000 60,000 52,500 Direct labor hours, 30,000 40,000 25,000 40,000 Direct labor costs.. $12,000 $10,000 $3,750 $7,000 Machine hours..... 25,000 15,000 9,500 40,000 Manufacturing overhead $30,000 $45,000 $20,000 $50,000