Problem 1

1. Applied overhead- 250,000/2000

=125
= 125 x 1,700 hours
= 212 500

2. Actual overhead – 221 000

3. Applied overhead – 212,500
Actual Overhead – 221,000
Underapplied Overhead - (8,500)

Problem 2
1. Predetermined variable OH rate.
Change∈variable factory overhead
Variable overhead rate =
Change∈Machine hours
($ 1,875,000−$ 1,250,000)
=
(150,000−100,000) Machine hours
$ 625,000
=
50,000
= $12.50 per machine hours
2. Predetermined fixed OH rate using practical capacity.
¿ factory overhead
Fixed overhead rate =
Practical capacity Machine hours
$ 1,440,000
=
180,000
= $8 per machine hours
3. Predetermined fixed OH rate using expected capacity.
¿ factory overhead
Fixed overhead rate = 2
of Practical capacity Machine hours
3
 $ 1,440,000
= 2
x 180,000
3
= $12 per machine hours

4. Variable overhead applied

Variable overhead= machine hours x variable overhead rate
= 111,000 machine hours x $12.50 per machine hours
= $1,375,000 – variable overhead applied during 2016
5. Fixed overhead applied- practical capacity
Fixed overhead= machine hours x fixed overhead rate under practical capacity
= 111,000 machine hours x $8 per machine hours
= $888,000 – fixed overhead applied (practical capacity) during 2016
6. Fixed overhead applied- expected capacity
Fixed overhead= machine hours x fixed overhead rate under practical capacity
= 111,000 machine hours x $ 12 per machine hours
= $1,332,000 – fixed overhead applied (expected capacity) during 2016

7. Applied Fixed Overhead (practical) - $ 880,000

Actual Fixed Overhead - $ 2,710,000
Underapplied Fixed Overhead (practical) - ($ 1,830,000)

8. Applied Fixed Overhead (expected) - $ 1,332,000

Actual Fixed Overhead - $ 2,710,000
Underapplied Fixed Overhead (expected) - ($ 1,378,000)
Problem 3
1. High-Low Method: Formula y = a + bx
Y= Total Cost a=fixed cost b= variable cost
X= kWhs
a. Variable component
= (7200-4000)/ (220-120)
 = 3200/100
= 32 per kWhs

b. Fixed component
a=y-bx
a= 7200 – 32 (220)
a= $ 160 per month

2. y = 160 + 32x

y = 160+ 32(135)

y = $ 4,336

3. y= a+bx
5280= 160 + 32x
5280- 160=32x
5120= 32x
32 32
160= x

4.

Least Squares:
x y xy x^2
4,00 480,00
120 0 0 14,400
1,300,0
200 6,500 0 40,000
4,75
150 0 712,500 22,500
1,008,0
180 5,600 00 32,400
1,584,0
220 7,200 00 48,400
5,35 936,25
175 0 0 30,625
 6,020,75 188,32
Sum 1,045 33,400 0 5
Averag 174.16 5,566.66
e 7 7

b = (Exy - nxy)/(Ex^2 - nx^2)

Numerator 203,568.72
Denominat
or 6,320.12
b $ 32.21

a = y - bx
a = 5,566.667 – 32. 21(174.167)
a ($ 43.25)

y=a+bx
y=-43.25+32.21x

Problem 4

a. Direct Method
Rhombus Triangle Sine Cosine Tangent Total

Cost before allocation $ 40,000 $20,000 $ 50,000 $ 80,000 $ 30,000 $ 220,000

Allocation:
Rhombus (40,000) $ 12,000 $ 16,000 $ 12,000 -
Triangle (20,000) 10,000 6,000 4,000 -
Total cost after
Allocation - - $ 72,000 $ 102,000 $46,000 $220,000

b. Step method
Triangle Rhombus Sine Cosine Tangent Total

Cost before allocation $ 20,000 $40,000 $ 50,000 $ 80,000 $ 30,000 $ 220,000

Allocation:
Triangle (20,000) 4,000 $ 8,000 $ 4,800 $ 3,200 -
$44,000 $58,000 $84,800 $33,200 $220,000
Rhombus (44,000) 13,200 17,600 13,200
Total cost after
Allocation - - $ 71,200 $ 102,400 $46,400 $220,000

C. Simultaneous Method
Rhombus= 40,000 + 20% Triangle
Triangle= 20,000 + 20% Rhombus
Rhombus= 40,000+ 20% (20,000 +20% Rhombus)
Rhombus= 40,000 + 4,000 + 0.o4 Rhombus
Rhombus = 44,000+ 0.04 Rhombus
(1-0.04) Rhombus = 44,000
0.96 Rhombus = 44,000
0.96 0.96
Rhombus= $ 45,833.33

Triangle = 20,000 + 20% (45,833.333)

Triangle = 20,000 + 91,66.67
Triangle = 29,166.67

c. Simultaneous
Method
Sine Cosine Tangent Rhombus Triangle
Cost before Allocation 50,000 80,000 30,000 40,000 20,000
Rhombus $ 10,999.999 $ 14,666.665 $ 10,999.999 ($ 45,833.333) $9,166.666
Triangle 11,666.664 7,000.0008 4,666.672 5,833.334 ($29,166.67)
Total cost after
$ 72,666.67 $ 101,666.67 $45,666.67
Allocation - -

Problem 5
1. Variable overhead spending variance
 a. Variable OH spending variance (Actual - Budgeted* VOH *based on actual hours)
Actual $ 14,560
Budgeted (actual hours) 15,000 PVOHR $ 3
VOH Spending variance (440) Favorable

2. Fixed overhead spending variance

b. Fixed OH Spending variance (Actual - Budgeted FxOH based on normal/original capacity)

Actual 17,890
Budgeted (normal capacity) 16,000
FxOH Spending Variance 1,890 Unfavorable

3. Idle Capacity Variance

c. Idle Capacity Variance (Budgeted FxOH based on normal capacity - Applied Fixed Overhead)
Budgeted (normal capacity) 16,000
Applied 20,000 PFxOHR $ 4
Idle Capacity Variance (4,000) Favorable

4. Total overhead variance

d. Overall FOH variance (balance of three variances above)

Overall FOH Variance (2,154) Favorable

Actual OH $ 32,890
Applied OH $ 35,000 POHR $ 7
OH Variance $ (2,110) Favorable