Question

In: Accounting

In December 2010, Gomez Company’s manager estimated next year’s total direct labor cost assuming 50 persons...

In December 2010, Gomez Company’s manager estimated next year’s total direct labor cost assuming 50 persons working an average of 2,020 hours each at an average wage rate of $15 per hour. The manager also estimated the following manufacturing overhead costs for year 2011.

  

  
  Indirect labor $ 167,650
  Factory supervision 123,000
  Rent on factory building 76,000
  Factory utilities 46,000
  Factory insurance expired 35,100
  Depreciation—Factory equipment 249,000
  Repairs expense—Factory equipment 31,500
  Factory supplies used 34,400
  Miscellaneous production costs 10,000
  
  Total estimated overhead costs $ 772,650
  

  

At the end of 2011, records show the company incurred $723,096 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $348,000; Job 202, $324,000; Job 203, $167,000; Job 204, $416,000; and Job 205, $174,000. In addition, Job 206 is in process at the end of 2011 and had been charged $10,600 for direct labor. No jobs were in process at the end of 2010. The company’s predetermined overhead rate is based on direct labor cost.

  

Required
1a.

Determine the predetermined overhead rate for year 2011. (Omit the "%" sign in your response.)

  

  Predetermined overhead rate %

  

1b.

Determine the total overhead cost applied to each of the six jobs during year 2011. (Omit the "$" sign in your response.)

  

Job No. Applied Overhead
201 $     
202     
203     
204     
205     
206     
  
Total $     
  

  

1c.

Determine the over- or underapplied overhead at year-end 2011. (Input all amounts as positive values.Omit the "$" sign in your response.)

  

   (Click to select)Underapplied overheadOverapplied overhead $   

  

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 year 2011. (Omit the "$" sign in your response.)

  

Date General Journal Debit Credit
Dec. 31   (Click to select)Finished goods inventoryCashFactory overheadFactory payrollSalesCost of goods soldAccounts receivableGoods in process inventory     
       (Click to select)Goods in process inventoryCost of goods soldAccounts receivableCashFactory payrollFactory OverheadSalesFinished goods inventory     

Solutions

Expert Solution

1-a.
  Predetermined overhead rate
Total direct labor cost 50*2020*15= 1515000
Total Estimated OH costs 772650
So,  Predetermined overhead rate=
Total Estimated OH/Total Direct labor cost 772650/1515000=
0.51
1b. Total overhead cost applied to each of the six jobs during year 2011.
Job No. Direct labor costs Applied Overhead at 0.51*Dl cost
201 348000 177480
202 324000 165240
203 167000 85170
204 416000 212160
205 174000 88740
206 10600 5406
  
Total 1439600 734196
1c.
Over -applied overhead (applied OH is gretaer than Oh incurred) at year-end 2011---- Actual OH incurred- OH applied=723096-734196=
11100
2...Date Debit Credit
Dec. 31     
  Factory overhead 11100
       Cost of goods sold 11100
(over-applied OH credited to COGS)

ekkarill92 answered 1 year ago
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