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In December 2016, Learer Company’s manager estimated next year’s total direct labor cost assuming 40 persons...

In December 2016, Learer Company’s manager estimated next year’s total direct labor cost assuming 40 persons working an average of 2,000 hours each at an average wage rate of $30 per hour. The manager also estimated the following manufacturing overhead costs for 2017.

Indirect labor $ 340,200 Factory supervision 110,000 Rent on factory building 101,000 Factory utilities 107,000 Factory insurance expired 87,000 Depreciation—Factory equipment 473,000 Repairs expense—Factory equipment 79,000 Factory supplies used 87,800 Miscellaneous production costs 55,000 Total estimated overhead costs $ 1,440,000 At the end of 2017, records show the company incurred $1,599,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $623,000; Job 202, $582,000; Job 203, $317,000; Job 204, $735,000; and Job 205, $333,000. In addition, Job 206 is in process at the end of 2017 and had been charged $36,000 for direct labor. No jobs were in process at the end of 2016. The company’s predetermined overhead rate is based on direct labor cost. Required 1-a. Determine the predetermined overhead rate for 2017. 1-b. Determine the total overhead cost applied to each of the six jobs during 2017. 1-c.

Determine the over- or underapplied overhead at year-end 2017. 2. Assuming that any over- or underapplied overhead is not material, prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold at the end of 2017.

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Expert Solution

Req 1-a
Pre-determined Oh rate:
Total Direct labour cost:
Number of employees 40
Multiply: Hours annual per employee 2000
Total DLH worked 80000
Multiply: Labour rate per hour 30
Directt labour cost 2400000
OH rate based on % of DLC:
Estimated Overheads 1440000
Divide: Direct labour cost 2400000
OH rate based on % of DLC: 60%
Req 1-b:
Overheads applied DLC Oh rate OH applied
Job 201. 623000 60% 373800
Job 202 582000 60% 349200
Job 203 317000 60% 190200
Job 204 735000 60% 441000
Job 205 333000 60% 199800
Job 206 36000 60% 21600
Total Overheads applied 1575600
Req 2.
Total Overheads incurred: 1599000
Overheads applied 1575600
Under-applied Ooverheads 23400
Adjusting Entry:
S.no. Accounts title and explanation Debit $ Credit $
a. Cost of Goods sold 23400
    Manufacturing Overheads 23400

ekkarill92 answered 1 month ago
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