Question

Instant Access Services Inc. leases access to high-speed computers to small businesses. It provides the following information for the year:

Budgeted

Actual

Overhead cost $2,100,000 $1,900,000
Computer hours 100,000 90,000
Direct labor hours 200,000 180,000
Overhead is applied on the basis of computer hours.

(A) Compute the predetermined overhead rate.

$____________

(B)Determine the amount of overhead applied for the year.

$___________

Answer 1

a. $21

b. $1,890,000

Step-by-step explanation:

a. The computation of the predetermined overhead rate is shown below:

Predetermined overhead rate = (Total estimated manufacturing overhead) ÷ (estimated computer hours)

= $2,100,000 ÷ 100,000 hours

= $21

b. Now the applied overhead which equals to

= Actual computer hours × predetermined overhead rate

= 90,000 hours × $21

= $1,890,000