The Mars Company applies factory overheads to production by-00135
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vu bt301 Introduction to Biotechnology.
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vu bt301 Mid Term Solved Past Paper No. 1.
Question 1: The Mars Company applies factory overheads to production by means of pre-determined rate based on expected actual capacity. Factory overhead at expected actual capacity of 120,000 hours is Rs. 240,000 of which Rs. 60,000 is fixed and Rs.180,000 is variable. Normal capacity of the company is 150,000 hours. The actual capacity attained during the year was 100,000 hours and actual factory overhead was Rs. 180,000.
Calculate: Pre-determined overhead rate based on expected actual capacity and normal capacity.
O
Fixed FOH rate = fixed FOH cost/ expected actual capacity = 60000/120000 = 0.50
Add variable FOH rate = Variable FOH cost for expected actual capacity/ expected actual capacity = 180000/120000 = + 1.50
FOH applied rate based on expected actual capacity 2.00
Pre-determined overhead rate based on normal capacity
Fixed FOH rate = fixed FOH cost/ normal capacity =60000/150000 = 0.40
Add variable FOH rate = +1.50
Pre-determined overhead rate based on normal capacity = 1.90
Calculate: Pre-determined overhead rate based on expected actual capacity and normal capacity.
O
- ver-applied or under-applied factory overhead based on rate used by the company.
- Budget variance and volume variance
Answer:
Pre-determined overhead rate based on expected actual capacityFixed FOH rate = fixed FOH cost/ expected actual capacity = 60000/120000 = 0.50
Add variable FOH rate = Variable FOH cost for expected actual capacity/ expected actual capacity = 180000/120000 = + 1.50
FOH applied rate based on expected actual capacity 2.00
Pre-determined overhead rate based on normal capacity
Fixed FOH rate = fixed FOH cost/ normal capacity =60000/150000 = 0.40
Add variable FOH rate = +1.50
Pre-determined overhead rate based on normal capacity = 1.90
