Question

With the following information answer questions A to D

The company produces computers. Its normal costing system consists of 2 cost categories (materials and labor) and a manufacturing overhead category. Manufacturing overhead is applied using a direct labor hour rate.

Budgdeted information for january-dec 2020
Direct labor 420,000
Manufacturing overhead 252,000
Direct labor hours 25,200

At the end of 2020, these were the jobs with costs accumulated
#one
Direct materials 22,000
Direct labor 11,000
Labor machine hour 1,200
#two
Direct materials 42,000
Direct labor 39,000
Labor machine hours 2,400

Total current costs for 2020 were
Manufactory overhead 250,000
Direct labor 400,000
Total labor hours during 2020 were 24,000

Determine Manufactory Overhead rate application: A
Make journal entry for manufactury overhead application in 2020: B
Is it overapplied or underapplied? Please demonstrate under a T account. C
Calculate the total cost for order # 1 D

Answer 1

Req A:
Budgeted Overheads		2,52,000
Divide: Budgetd Labor hours	25,200
OH rate per DLH		10.00
Req B.
Journal entry for application of OH:
S.no.	Accounts title and explanations	Debit $	Credit $
a.	Work in process-Job 1	(1200*10)	12,000
	Work in Process-Job 2	(2400*10)	24,000
	Manufacturing Overheads		36,000
Req c:
Manufacturing Overheads
Accounts payable and others	2,50,000	Work in process inv.		2,40,000
				(24,000*10)
Ending balance		10,000
As, the incurred amount is more than applied, therefore, the overheads is having a debit balance.
The Manufacturing overheads is under-applied by $10,000.
Req D.
Total Cost of Job No. 01:
Material			22,000
Labor			11,000
Overheads cost		12,000
Total Cost of Job No. 01:	45,000