# Duggan Overhead Doors Copy

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Duggan Overhead Doors Copy
Duggan company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total \$341,010 for the year, and machine usage is estimated at 126,300 hours.For the year, \$363, 036 of overhead costs are incurred and 132,600 hours are use. Please compute the manufacturing overhead rate for the year.

The buedgeted overhead rate is based on the estimates that the company makes at the beginning of the year. Remember, overhead rate = total cost / total cost driver. In this case, the cost driver is machine hours. Therefore, our equation for overhead rate is:
341,010 / 126,300 = 2.7 <---answer
This means that every machine hour costs the business \$2.70. Therefore, during a year that incurs 132,600 hours, we can say that budgeted costs are \$358,020, which is a favorable variance from actual costs of \$363,036. Remember, when expenses are lower than expected it is favorable, but if revenues are lower than expected it is unfavorable. Many professors often ask you to explain this in your response.

16-3 kins Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company’s operations.

Standard

Custom
Direct labor costs

\$57,100

\$113,000
Machine hours

1,170

1,370
Setup hours

100

400

Total estimated overhead costs are \$309,200. Overhead cost allocated to the machining activity cost pool is \$196,000, and \$113,200 is allocated to the machine setup activity cost pool.

Question:
Compute the overhead rate using the traditional (plantwide) approach.(Round answers to 2 decimal places, e.g. 12.25%.)

17-1
The ledger of Custer Company has the following work in process account.
Work in Process—Painting
5/1

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