In December 2014, Learer Company’s manager estimated next year’s total direct labor cost assuming 25 persons working an average of 3,000 hours each at an average wage rate of $30 per hour. The manager also estimated the following manufacturing overhead costs for year 2015.
|
|
|
|
| Indirect labor |
$ |
339,200 |
|
| Factory supervision |
|
169,000 |
|
| Rent on factory building |
|
160,000 |
|
| Factory utilities |
|
108,000 |
|
| Factory insurance expired |
|
88,000 |
|
| Depreciation—Factory equipment |
|
486,000 |
|
| Repairs expense—Factory equipment |
|
80,000 |
|
| Factory supplies used |
|
88,800 |
|
| Miscellaneous production costs |
|
56,000 |
|
|
|
|
|
| Total estimated overhead costs |
$ |
1,575,000 |
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| At the end of 2015, records show the company incurred $1,863,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $624,000; Job 202, $583,000; Job 203, $318,000; Job 204, $736,000; and Job 205, $334,000. In addition, Job 206 is in process at the end of 2015 and had been charged $37,000 for direct labor. No jobs were in process at the end of 2014. The company’s predetermined overhead rate is based on direct labor cost. |
| Required |
| 1.a |
Determine the predetermined overhead rate for year 2015.
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| Predetermined overhead rate |
| Choose Numerator: |
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Choose Denominator: |
= |
Predetermine Overhead Rate |
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= |
Predetermine overhead rate |
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= |
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1.b
Determine the total overhead cost applied to each of the six jobs during year 2015.
|
|
| Job No. |
Direct Labor |
Overhead Cost Applied |
| 201 |
$624,000 |
|
| 202 |
583,000 |
|
| 203 |
318,000 |
|
| 204 |
736,000 |
|
| 205 |
334,000 |
|
| 206 |
37,000 |
|
| Total |
$2,632,000 |
$0 |
|
1.c
Determine the over- or underapplied overhead at year-end 2015.
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 2015.
Journal entry worksheet
Record the entry to allocate any overapplied or underapplied overhead to Cost of Goods Sold at the end of year 2015.
Note: Enter debits before credits.
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| Date |
General Journal |
Debit |
Credit |
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