Wesley Manufacturing Co. is studying the results of apply factory overhead to production. The following data have been used: (1) estimated factory overhead, $60,000; (2) estimated material costs, $50,000; (3) estimated direct labor costs, $60,000; (4) estimated direct labor overhead hours, 10,000; (5) estimated machine hours, 20,000; and (6) work-in-process at the beginning of the month, $0.
The actual factory overhead incurred for the month of July was $80,000, and the production statistics on July 31 are as follows:
1. Compute the predetermined rate, based on the following:
a. Direct Labor Cost
b. Direct Labor Hours
c. Machine Hours
2. Using each of the methods, compute the Estimated Total Cost of each job at the end of the month.
3. Determine the Under- or Overapplied Factory Overhead, in Total, at the End of the Month under each of the methods.
4. Which method would you recommend to the Senior Management of Wesley Manufacturing Co.? And, provide your rationale as the Cost Accounting Manager for selecting this particular method for implementation in applying the factory overhead costs to production for the Wesley Manufacturing Co.