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| In December 2014, Infodeo established its predetermined overhead rate for movies produced during year 2015 by using the following cost predictions: overhead costs, $1,628,000,and direct labor costs, $440,000. At year-end 2015, the company’s records show that actual overhead costs for the year are $909,800. Actual direct labor cost had been assigned to jobs as follows. |
| Movies completed and released | $ | 200,000 |
| Movies still in production | 49,000 | |
| Total actual direct labor cost | $ | 249,000 |
| 1. | Determine the predetermined overhead rate for year 2015. | ||||||||||||||||||||||
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| 2&3. | Enter the overhead costs incurred and the amounts applied during the year using the predetermined overhead rate and determine whether overhead is overapplied or underapplied. | ||||||||||||||
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| 4. Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold | |||||||||||||||||||||||||||||||||||
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Expert Answer
1.
Overhead Rate = Estimated overhead costs ÷ Estimated direct labor costs
= $1,628,000 ÷ $440,000
= 370%
2&3.
Overhead applied to jobs = $249,000 × 370%
= $921,300
| Factory over head | |||
| Incurred | $909,800 | Applied | $921,300 |
| Underapplied | $11,500 | ||
4.
| Date | General journal | Debit | Credit |
| Dec.31 | Cost of goods sold | $11,500 | |
| Factory overhead | $11,500 |
