Cost and production data for Rob Manufacturing for the 2018 financial year was as follows:
Budgeted variable factory overhead $120,000
Budgeted fixed factory overhead $180,000
Budgeted production (direct labour hours) $15,000
Actual variable factory overhead $125,300
Actual fixed factory overhead $164,700
Actual production (direct labour hours) 15,500
It is organisational policy and procedure that Factory overhead is applied to production using direct labour hours as the cost driver.
(a) Calculate the factory overhead application rate, and,
(b) Under or over applied overhead.
a)Computation of overhead application rate
b)Computation of over-applied overhead