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