At the beginning of the year, Smith, INc., budgeted the following: Units: 10,000 Sales: $100,000 Total variable expenses: $ 60,000 Total fixed expenses: $ 20,000 Variable factory overhead $ 30,000 Fixed factory overhead: $ 10,000 There were no beginning inventories. At the end of the year, no work was in process, total factory overhead incurred was $39,500, and underapplied factory overhead was $1,500. Factory overhead was applied on the basis of budgeted unit production. How many units were produced this year?

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Business

Megan Gill

19 September, 21:21

At the beginning of the year, Smith, INc., budgeted the following: Units: 10,000 Sales: $100,000 Total variable expenses: $ 60,000 Total fixed expenses: $ 20,000 Variable factory overhead $ 30,000 Fixed factory overhead: $ 10,000 There were no beginning inventories. At the end of the year, no work was in process, total factory overhead incurred was $39,500, and underapplied factory overhead was $1,500. Factory overhead was applied on the basis of budgeted unit production. How many units were produced this year?

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Aliyah Vaughan · Answer 1

Actual units produced: 9,500

Explanation:

actual units x overhead rate - actual factory overhead = underapplied

the underapplied overhead means the actual overhead was greater than applied overhead so we can build the formula as follow:

actual units x r - 39,500 = - 1,500

We need to calculate the rate for overhead:

on the budget total overhead:

10,000 fixed + 30,000 variable = 50,000

and units are 10,000

so rate = 40,000 / 10,000 = 4

Now we return to the formula:

actual units x 4 - 39,500 = - 1,500

actual units = (39,500 - 1,500) / 4

actual units = 38,000 / 4 = 9,500