Kramer Company has decided to use a predetermined rate to assign factory overhead to production. The following predictions have been made for 2004:
Required:

a.
Compute the predetermined factory overhead rate under three different bases: (1) direct labour hours, (2) direct labour costs, and (3) machine hours.
b.
Assume that actual factory overhead was £152,500 and that Kramer elected to apply factory overhead to Work in Process based on direct labour hours. If actual direct labour was 42,000 hours for 2004, was factory overhead overapplied or underapplied? By how much?

Question

Kramer Company has decided to use a predetermined rate to assign factory overhead to production. The following predictions have been made for 2004:
Required:
  
a.
Compute the predetermined factory overhead rate under three different bases: (1) direct labour hours, (2) direct labour costs, and (3) machine hours.
b.
Assume that actual factory overhead was £152,500 and that Kramer elected to apply factory overhead to Work in Process based on direct labour hours. If actual direct labour was 42,000 hours for 2004, was factory overhead overapplied or underapplied? By how much?

Quizplus · Accepted Answer

The Answer of Kramer Company has decided to use a predetermined rate to assign factory overhead to production. The following predictions have been made for 2004:
Required:
  
a.
Compute the predetermined factory overhead rate under three different bases: (1) direct labour hours, (2) direct labour costs, and (3) machine hours.
b.
Assume that actual factory overhead was £152,500 and that Kramer elected to apply factory overhead to Work in Process based on direct labour hours. If actual direct labour was 42,000 hours for 2004, was factory overhead overapplied or underapplied? By how much?

Kramer Company Has Decided to Use a Predetermined Rate to Assign