Sambell Manufacturing Uses a Predetermined Manufacturing Overhead Rate to Allocate

question 337

Essay

Sambell Manufacturing uses a predetermined manufacturing overhead rate to allocate overhead to individual jobs. At the beginning of the year, the company expected to incur the following:

Required:
1. Compute Sambell's indirect cost allocation rate based on labour cost.
2. Compute Sambell's indirect cost allocation rate based on machine hours.
3. How much overhead was allocated during the year if the allocation base was direct labour cost?
4. How much manufacturing overhead was incurred during the year?

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Definitions:

Fixed Overhead Budget Variance

The variance between the budgeted and the actual incurred fixed overhead expenses.

Manufacturing Overhead Applied

The portion of estimated manufacturing overhead cost that is assigned to each unit of production based on a predetermined rate.

Labor-Hour

A labor-hour represents an hour of work performed by an employee, typically used as a basis for allocating labor costs or measuring productivity.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including but not limited to utilities, maintenance, and factory equipment depreciation.