Question

Harwood Company uses a job-order costing system that applies overhead cost to jobs on the basis of machine-hours. The company's predetermined overhead rate of $2.30 per machine-hour was based on a cost formula that estimates $225,400 of total manufacturing overhead for an estimated activity level of 98,000 machine-hours. Required: 1. Assume that during the year the company works only 93,000 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 underapplied or overapplied overhead for the year and show the balance in your Manufacturing Overhead T-account. |2B. Prepare a journal entry to close the company's underapplied or overapplied overhead to Cost of Goods Sold.

Answer 1

1) T account

Manufacturing overhead					Work in process inventory
Maintenance	39000	213900	a) work in process inventory		Direct material	890000
Indirect material	9800				Direct labor	108000
Indirect labor	60000				Manufacturing overhead	213900
Utilities	45000
Insurance	8800
Depreciation	55000
Balance	3700

2a) Under applied overhead =3700

2b) Journal entry

Transaction	General Journal	Debit	Credit
	Cost of goods sold	3700
	Manufacturing overhead		3700
	(To record under applied overhead)