Question

In: Accounting

At the beginning of 2012, upper-level management met and determined that the budgeted amount of MOH...

At the beginning of 2012, upper-level management met and determined that the budgeted amount of MOH for the upcoming year was $1,629,000. They also estimated that the total number of direct labor hours that will be needed this year would be 123,000 hours. The following data relates to activities that occurred in the month of May:

  1. Total labour hours worked for the month of May was 11,000 hours of which 80% were directly used in production, 15% were used indirectly in the production process and the remaining 5% were paid to administrative staff. All production staff are paid $15 per hour whereas administrative staff are paid $22 per hour.
  2. MOH for the month was applied to production.

journal entry only

Solutions

Expert Solution

Journal Entries
Events Particulars Debit Credit
1) Work in Process (11000 x 80% x $ 15) $      132,000
Manu. OH (11000 x 15% x $ 15) $         24,750
Salaries Expense (11000 x 5% x $ 22) $         12,100
To Factory Payroll $      168,850
2) Work in Process $      116,546
To Manu. OH $      116,546
(Workings)
Workings:
Predetermined OH rate = Budgeted Manu. Oh / Budgeted Direct Labor Hours
= $ 1629000 / 123000
= $           13.24 per DLH
Actual Direct Labor Hours = 11000 x 80%
= 8800
MOH applied = $ 13.24 x 8800
= $      116,546

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