HA2011 Tutorial Questions On Management Accounting

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Question 2 - Week 3 (9a) (11 marks)

Luxury Goods Pty Ltd allocates manufacturing overhead to work in process on the basis of machine hours. On 1 January of the current year, there were no balances in work in process or finished goods inventories. The following estimates were included in the budget for the current year:

Total estimated manufacturing overhead $300 000
Total estimated machine hours 40 000

During January, the firm worked on the following production jobs:

B81: 1 600 machine hours
J76: 2 400 machine hours
M49: 1 000 machine hours

During January, job numbers B81 and J76 were completed, and job number B81 was sold. The actual manufacturing overhead incurred during January was $30 000.

Required:

  1. Calculate the company’s predetermined overhead rate for the year.
  2. How much manufacturing overhead was applied to production during January?
  3. Calculate the overapplied or underapplied overhead for January.

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