Question

In: Accounting

hardwood company uses a job order costing system that applies overhead cost to jobs on the...

hardwood company uses a job order costing system that applies overhead cost to jobs on the basis of machine hours. The companys predetermined overhead rate of $2.50 Per machine hour was based on the cost formula that estimates $237,500 of total manufacturing overhead for an estimated activity level of 95,000 machine hours.

1.

Manufacturing Overhead

Maintenance 36,000 ??? (a)

Indirect Materials 9,500

Indirect Labor 75,000

Utilities 44,000

Insurance 8,500

Depreciation 56,000

Balance: ???

Work in Process:

Direct Materials 860,000

Direct Labor 105,000

Overhead (a) ????

Required:

1. Assume that during the year the company works only 90,000 machine hours and incurs the following costs in the manufacturing overhead and work in process accounts: compute the amount of overhead cost that would be applied to work in process for the year and make the entry in your T accounts.

2a. Compute the amount of under applied or overapplied overhead for the year and show the balance in your manufacturing overhead T account.

2b. Prepare a journal entry to close the companies under applied or overapplied overhead cost of goods sold.

Expert Solution

	Computation of applied overhead cost

	Applied overhead cost shall be computed by multipying the machine hrs actual
	with the predetermined overhead rate

	Actual Machine Hrs	90000
	Predetermined OH rate	$2.50

	Applied OH Cost	Actual Machine hrs*Predetermined OH Rate
		90000*$2.5
		$225,000

1	Calculation the OH cost applied to WIP as shown below:

		Manufacturing OH
	Particulars	Amount	Particulars	Amount
	Maintenance	$36,000	WIP	$225,000
	Indirect Materials	$9,500
	Indirect Labour	$75,000
	Utilities	$44,000	Balance	$4,000
	Insurance	$8,500
	Depreciation	$56,000
		$229,000		$229,000

		WIP
	DM	$860,000	FG-B/F	$1,190,000
	DL	$105,000
	OH	$225,000
		$1,190,000		$1,190,000

2-a	Calculate the under applied OH
	Under applied OH shall be computed by deducting the applied OH from the actual
	OH

	Applied OH	$225,000
	Actual OH	$229,000

	Under applied OH	Actual OH -Applied OH
		$229000-$225000
		$4,000

b		In the Books of H Company
		Journal Entry
	Date	Description	Dr Amount	Cr Amount
		Cost of Goods Sold
		To Manufacturing OH
		to record the underapplied OH to Cost of Goods sold

ekkarill92 answered 1 year ago

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