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In: Accounting

In December 2016, Learer Company’s manager estimated next year’s total direct labor cost assuming 30 persons...

In December 2016, Learer Company’s manager estimated next year’s total direct labor cost assuming 30 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 $228,200
Factory supervision 136,000
Rent on factory building 149,000
Factory utilities 97,000
Factory insurance expired 77,000
Depreciation—Factory equipment 201,000
Repairs expense—Factory equipment 69,000
Factory supplies used 77,800
Miscellaneous production costs 45,000
Total estimated overhead costs $1,080,000


At the end of 2017, records show the company incurred $1,563,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $613,000; Job 202, $572,000; Job 203, $307,000; Job 204, $725,000; and Job 205, $323,000. In addition, Job 206 is in process at the end of 2017 and had been charged $26,000 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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