The following information pertains to Glass Works Company for 2014. Budgeted direct-labour cost: --------------------------------75,000 hours at...

The following information pertains to Glass Works Company for 2014.

Budgeted direct-labour cost: --------------------------------75,000 hours at $16 per hour

Actual direct-labour cost: ------------------------------------80,000 hours at $17.50 per hour.

Budgeted Manufacturing Overhead: ---------------------$ 997,500

Actual Manufacturing Overhead:
Depreciation ------------------------------------------------- $ 240,000
Property Taxes---------------------------------------------------12,000
Indirect Labour --------------------------------------------------82,000
Supervisory Salaries --------------------------------------------200,000
Utilities------------------------------------------------------------ 59,000
Insurance ----------------------------------------------------------30,000
Rental of Space-------------------------------------------------- 300,000
Indirect Material --------------------------------------------------- 79,000

Required
(i) Compute the firm’s predetermined overhead rate, which is based on direct-labour hours.
(ii) Calculate the overapplied or underapplied overhead for 2014.
(iii) Prepare a journal entry to close out the Manufacturing Overhead Account into Cost of Goods Sold.

Expert Solution

Calculate predetermined overhead
Budgeted manufacturing overhead	$997,500
Budgeted direct labor hours	75000	hours
Predetermined overhead
( manufacturing overhead/ direct labor hours
(997500/75000)	$13.30

calculate under or over applied overhead
Applied overhead
( Actual direct labor hours*predetermined overhead
(80000*13.30)		1064000
Actual manufacturing overhead
Depreciation	240000
property taxes	12000
indirect labor	82000
supervisory salaries	200000
utilities	59000
insurance	30000
rental space	300000
Indirect materials	79000
Total Actual manufacturing overhead		1002000
Overapplied overhead		62000
Since applied overhead is more than actual overhead, hence over applied

Accounts and Explanation	Debit	Credit
manufacturing overhead	62000
Cost of goods sold		62000
( To record the closing entry for the overapplied overhead)

ekkarill92 answered 2 years ago

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