Question

#14

in December 2016, Custom Mfg. established its predetermined overhead rate for lobs produced during 2017 by using the following cost predictions: overhead costs, $640,000, and direct materials costs, $400,000. At year-end 2017, the company's records show that actual overhead costs for the year are $813,600. Actual direct material cost had been assigned to jobs as follows. Jobs completed and sold $380, eee Jobs in finished goods inventory 76, eee Jobs in work in process inventory 47,200 Total actual direct materials $503, eee cost 1. Determine the predetermined overhead rate for 2017 283. Enter the overhead costs incurred and the amounts applied during the year aning the predetermined overhead rate and determine whether overhead is overapplied or underapplied 4. Prepare the adjusting entry to allocate any over or underapplied overhead to Cost of Goods Sold

Answer 1

1) Predetermined overhead rate for 2017 = (Estimated overhead cost/Estimated direct material cost) Predetermined overhead rate for 2017 = (640000/400000)*100 Predetermined overhead rate for 2017 = 160% 2) Date Date Particulars Actual Overhead Debit $ 813,600 Particulars Applied Overhead (503000*160%) Credits 804,800 Under applied 8,800 3) Adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold :- Particulars Debit $ Credits Cost of goods sold 8,800 To Factory Overhead 8,800 (Entry for under applied overhead)