Example 4
Given the following information about Nona factory:
1-budgeted factory overhead is 65000$
2-budgeted allocation base is 14000 machine hours
3-actual factory overhead is 70,000$
Job 10 is sold, job 20 is completed but not yet sold, job 30 is still in process
Required
1-prepare cost sheet for the 3 job orders
2-compute over or under allocated overhead
The solution:
the budgeted overhead rate = budgeted factory overhead / budgeted allocation base =
65000$ / 14000 m.hrs. = 4.64$/m.hrs
1-the cost sheet:
2- Actual overhead = 65000$
Applied overheads = 11600 + 16240 + 20880 = 48720$
So, it is under allocated or applied as actual overhead is higher than the applied overhead
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