Smith Foundry in Columbus, Ohio, uses a predetermined manufacturing overhead rate to allocate overhead to individual jobs based on the machine hours required. At the beginning of the year, the company expected to incur the following:

Manufacturing overhead costs ………………………………………………… $ 630,000

Direct labor cost ………………………………………………………………….. $1,650,000

Machine hours ………………………………………………………………………….. 90,000

At the end of the year, the company had actually incurred the following:

Direct labor cost …………………………………………………………………. $1,230,000

Depreciation on manufacturing plant and equipment ………………… $ 480,000

Property taxes on plant …………………………………………………………… $ 19,500

Sales salaries ………………………………………………………………………… $ 26,500

Delivery drivers’ wages …………………………………………………………… $ 17,000

Plant janitors’ wages ………………………………………………………………… $ 8,500

Machine hours …………………………………………………………………. 56,500 hours

Requirements

1. Compute Smith’s predetermined manufacturing overhead rate.

2. How much manufacturing overhead was allocated to jobs during the year?

3. How much manufacturing overhead was incurred during the year? Is manufacturing overhead under-allocated or over-allocated at the end of the year? By how much?

4. Were the jobs over-costed or under-costed? By how much?



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