Asked by DYLAN HOLLOWAY on May 27, 2024
Verified
Fenderson Incorporated makes a single product--a cooling coil used in commercial refrigerators.The company has a standard cost system in which it applies overhead to this product based on the standard machine-hours allowed for the actual output of the period.Data concerning the most recent year appear below: 
The company incurred a total of $370,077 in manufacturing overhead cost during the year.
Required:
a.Compute the variable component of the company's predetermined overhead rate.
b.Compute the fixed component of the company's predetermined overhead rate.
c.Compute the company's predetermined overhead rate.
d.Determine whether overhead was underapplied or overapplied for the year and by how much.
Predetermined Overhead Rate
An estimated rate used to allocate manufacturing overhead costs to individual products or job orders, based on a chosen activity base.
Variable Component
A portion of a cost or expense that varies directly with the level of activity or production volume.
Fixed Component
The portion of total costs that remains constant regardless of the level of activity or output.
- Acquire knowledge on the calculation of variable and fixed components within the predetermined overhead rate.
- Investigate the application of overhead to see if it fell short or surpassed expectations, and specify the amount.
Verified Answer
= $3.59 per machine-hour
b.Fixed component of the predetermined overhead rate = $265,320/36,000 machine-hours
= $7.37 per machine-hour
c.Predetermined overhead rate = $394,560/36,000 machine-hours = $10.96 per machine-hour
d.
Learning Objectives
- Acquire knowledge on the calculation of variable and fixed components within the predetermined overhead rate.
- Investigate the application of overhead to see if it fell short or surpassed expectations, and specify the amount.
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