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Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs...

Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $300,000 for the year, and machine usage is estimated at 125,000 hours. For the year, $322,000 of overhead costs are incurred and 130,000 hours are used. Collapse question part (a) Compute the manufacturing overhead rate for the year. (Round answer to 2 decimal places, e.g. 1.25.) Manufacturing overhead rate $ per machine hour

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Expert Solution

given data

cverhead costs are expected = $ 300000

machine usage = 125000 hours

overheads cost incurred = $ 322000

machine used = 130000 hours

COMPUTATION OF MANUFACTURING OVERHEAD RATE FOR THE YEAR :

manufacturing overhead rate = overhead cost expected / machine usage

                                                    = 300000/125000

                                                      = $ 2.40

AMOUNT OF OVERHEADS APPLIED OVER OR UNDER :

amount of overheads applied = overheads cost incurred - (machine used hours *

                                                     overhead rate)

                                                  = 322000 - (130000 * 2.40)

                                                   = 322000 - 312000

                                                    +$ 10000

ADJUSTMENT ENTRY :

DATE PARTICULARS L/F DEBIT CREDIT
cost of goods sold a/c dr 10000
to manufacturing overheads a/c 10000
(being manufacturing OH expense transfered to cost of goods sold)

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