Calculating Departmental Overhead Rates and Applying Overhead to Production At the beginning of the year, Glaser Company estimated the following: Assembly Department Testing Department Total Overhead $338,000 $630,000 $968,000 Direct labor hours 130,000 40,000 170,000 Machine hours 45,000 120,000 165,000 Glaser uses departmental overhead rates. In the assembly department, overhead is applied on the basis of direct labor hours. In the testing department, overhead is applied on the basis of machine hours. Actual data for the month of March are as follows: Assembly Department Testing Department Total Overhead $29,850 $58,000 $87,850 Direct labor hours 11,700 3,450 15,150 Machine hours 4,100 10,900 15,000 Required: 1. Calculate the predetermined overhead rates for the assembly and testing departments. Round your answers to the nearest cent. Assembly department overhead rate $ per direct labor hour Testing department overhead rate $ per machine hour 2. Calculate the overhead applied to production in each department for the month of March. Assembly department $ Testing department $ 3. By how much has each department's overhead been overapplied

1. Assembly department overhead rate per direct labor hour - $ 2.60

  Testing department overhead rate per machine hour - $  5.25

2. Assembly department Applied overhead  $ 30,420

   Testing department Applied overhead  $ 57,225

3. Assembly department Over applied Overhead      $ 570

   Testing department Under applied Overhead        $ 775

Explanation:

Computation of Assembly department overhead per direct labor hour

Estimated Assembly Department Overhead                         $ 338,000

Estimated Direct Labor Hours                                                     130,000 hours

Predetermined Overhead rate for Assembly Department

$ 338,000 / 130,000 hours   = $ 2.60 per direct labor hours

Computation of Testing department overhead per machine hour

Estimated Testing Department Overhead                               $ 630,000

Estimated Machine Hours                                                             120,000

Predetermined Overhead rate for Testing Department

$ 630,000 / 120,000 hours   = $ 5.25 per machine hour      

Computation of applied overhead based on actual direct labor and machine hours    

Assembly Department

Actual no of Direct labor hours                                                        11,700

Assembly department overhead per direct labor hours                $ 2.60

Applied overhead in Assembly department ( 11,700 * $ 2.60)       $ 30.420  

Testing Department                                

Actual no of Machine hours                                                              10,900

Assembly department overhead per direct labor hours                $ 5.25

Applied overhead in Assembly department ( 10,900 * $ 5.25)      $ 57,225  

Computation of over or under applied

Assembly Department

Applied overhead                                                                               $ 30,420

Actual overhead                                                                                 $ 29,850

Assembly Department Over applied overhead                             $       570

Testing  Department

Applied overhead                                                                               $ 57,225

Actual overhead                                                                                 $  58,000

Testing Department under  applied overhead                             $   (    775)

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