Question

Dakota Products uses a job-costing system with two direct-cost categories (direct materials and direct manufacturing labor) and one manufacturing overhead cost pool. Dakota allocates manufacturing overhead costs using direct manufacturing labor costs. Dakota provides the following information:

Budget for 2017 Actual Results for 2017
Direct material costs $2,250,000 $2,150,000
Direct manufacturing labor costs 1,700,000 1,650,000
Manufacturing overhead costs 3,060,000 3,217,500

Required

1. Compute the actual and budgeted manufacturing overhead rates for 2017.

Answer 1

Actual manufacturing overhead = 195%

Budgeted manufacturing overhead rate = 180%

Step-by-step explanation:

The computation of actual and budgeted manufacturing overhead rates for 2017 is shown below:-

Particulars Budgeted for 2017 Actual result for 2017

Direct material

cost $2,250,000 $2,150,000

Direct manufacturing

labor costs $1,700,000 $1,650,000

Manufacturing overhead

costs $3,060,000 $3,217,500

Actual manufacturing

overhead 195%

Budgeted manufacturing

overhead rate 180%

Therefore for computing the actual manufacturing overhead we simply divide the manufacturing overhead cost by direct manufacturing labor cost of actual result for 2017 while for computing the budgeted manufacturing overhead rate we simply divide the manufacturing overhead cost by direct manufacturing labor cost of budgeted for 2017.