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1. Rolex Corporation estimates that its production for the coming year will be 10,000 units, which is
80% of normal capacity, with the following unit costs:
Materials P40
Direct Labor P60
Direct labor is paid at the rate of P24 per hour. The machine should be run for 20 minutes to
produce one unit. Total estimated overhead is expected to consist of P400,000 for variable
overhead and P400,000 for fixed overhead.
What is the predetermined overhead rate base on units of production, using the expected actual
capacity activity level?
2. Using the data in No. 1, what is the predetermined overhead rate based on material cost?
a. 200%
b. 150%
c. 250%
d. 300%
Solution:
₱ 800, 000 / ₱ 400, 000 = 200% of material cost
3. Using the data in No. 1, what is the predetermined overhead rate base on direct labor cost?
a. 133%
b. 153%
c. 166%
d. 113%
Solution:
₱ 800, 000 / 600, 000 = 133% of direct labor cost
4. Using the data in no. 1, what is the predetermined overhead rate based on direct labor hours?
Solution:
₱ 800, 000 / 25, 000 = ₱ 32 per direct labor
₱ 600, 000 / ₱ 24 = 25, 000 estimated direct labor
5. Using the data in No. 1, what is the predetermined overhead rate based on machine hours?
Solution:
1/3 hour per unit x 10, 000 units = 3.333 estimated machine hours
6. Using the data in No. 1, what is the overhead rate based on units of production using the normal
capacity activity level?
7. Using the data in No. 1 what is the overhead rate based on material cost using the normal capacity
activity level?
a. 160%
b. 155%
c. 165%
d. 200%
Solution:
₱ 800, 000 / ₱ 500,000 = 160% of material cost
₱ 40 x 12, 500 units = 500, 000
8. Using the data in No. 1, what is the overhead rate based on machine hours using the normal
capacity activity level?
a. P92
b. P85
c. P75
d. P60
Solution :
Data for the past two years for J& J Company are:
2009 2010
Units produced 10,000 11,500
Overhead applied per unit ₱ 15 ₱ 18
Actual overhead:
Fixed 50,000 55,000
Variable 95,000 150,000
Estimated Overhead
Fixed 50,000 56,000
Variable 130,000 142,000
9. What are the estimated units of production used to obtain the overhead application rates in 2009 and
2010?
a. (5,000)
b. 5,000
c. 7,000
d. (7,000)
Solution:
Applied factory overhead (10, 000 units x ₱ 15) ₱ 150, 000
Actual factory overhead ( ₱ 50, 000 + ₱ 95, 000) 145, 000
Overapplied overhead ₱ 5, 000
a. 7,000
b. (7,000)
c. 5,000
d. (5,000)
Solution:
Applied factory overhead (₱55, 000 +₱ 150, 000 ) ₱ 205, 000
Applied factory overhead ( 11, 000 units x ₱ 18) 198, 000
Underapplied overhead ₱ 7, 000
12. The normal annual capacity for Nena Company is 48,000 units with production rates being level
throughout the year. The March budget shows fixed manufacturing overhead of P1,440 and an estimated
variable manufacturing overhead rate of P2.10 unit per unit. During March, actual output was 4,100 units,
with a total manufacturing overhead of P9,000.
a. 10,086
b. 15,086
c. 8,733
d. 7,833
Solution:
Actual output 4, 100 units
Overhead rate:
Fixed overhead rate: ₱ 1, 440 / (48, 000 / 12) = ₱ 0.36
Variable overhead rate 2. 10 ₱ 2. 46
Applied manufacturing overhead ₱ 10, 086
13. Using the data in No. 12, what is the over or underapplied manufacturing overhead for March?
a. 1,086 underapplied
b. 1,086 overapplied
c. 267 underapplied
d. 267 overapplied
Solution:
Applied factory overhead ₱ 150, 000
Actual factory overhead 145, 000
Overapplied overhead ₱ 5, 000
14. The normal capacity for Maria Company is 36,000 machine hours, with fixed manufacturing overhead
budgeted at P16,920 and an estimated variable manufacturing overhead rate of P2.10 per hour. During
July, actual production required 2,700 machine hours, with a total overhead of P7,800.
a. 20,898
b. 19,290
c. 6,939
d. 9,639
Solution:
Actual production 2, 700 hours
Overhead rate:
Fixed overhead rate: (₱ 16, 920 / 12 ) / (36, 000 / 12) ₱ 0.47
Variable overhead rate 2. 10 2. 57
Applied manufacturing overhead ₱ 6. 939
15. Using the data in No. 14, what is the over or underapplied manufacturing overhead for July?
a. 13,098 overapplied
b. 13,098 underapplied
c. 861 underapplied
d. 861 overapplied
Solution:
Actual manufacturing overhead ₱ 7, 800
Applied manufacturing 6, 939
Underapplied manufacturing overhead ₱ 861
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