Question

#5

Suit U produces uniforms. The company allocates manufacturing overhead based on the machine hours each job uses. Suit Up reports the following cost data for the past​ year:

Actual Budget 7,300 hours 7,100 hours $ 20,000 $ 50,500 6,100 hours 6,300 hours $ 20,000 $ 53,500 Direct labor hours ........ Machine hours .. Depreciation on salespeople's autos ........ Indirect materials Depreciation on trucks used to deliver uniforms to customers Depreciation on plant and equipment Indirect manufacturing labor Customer service hotline .. Plant utilities .... Direct labor cost................... $ 12,500 $ 64,000 $ 41,500 $ 18,500 $ 49,900 $ 72,500 $ 11,500 $ 65,500 $ 44,500 $ 19,500 $ 51,400 $ 84,500

answers in blue boxes are wrong, please correct

Answer 1

Ans. 1	Particulars	Budgeted overhead	Actual overhead
	Indirect materials	$50,500	$53,500
	Depreciation on plant and equipment	$64,000	$65,500
	Indirect manufacturing labor	$41,500	$44,500
	Plant utilities	$49,900	$51,400
	Total manufacturing overhead	$205,900	$214,900
	*Predetermined overhead rate   =   Budgeted overhead cost / Budgeted machine hours
	$205,900 / 7,100
	$29 per machine hour
Ans. 2	Overhead applied = Actual machine hours * Predetermined overhead rate
	6,300 * $29
	$182,700
Ans. 3	Under applied overhead = Actual overhead - Applied overhead
	$214,900 - $182,700
	$32,200
	If the applied overhead is less than the Actual overhead
	it means that the overhead is under applied.
	Manufacturing   Overhead
	Particulars	Amount	Particulars	Amount
	Indirect materials	$53,500	Applied overhead	$182,700
	Depreciation on plant and equipment	$65,500	Under applied overhead	$32,200
	Indirect manufacturing labor	$44,500
	Plant utilities	$51,400
		$214,900		$214,900
	Journal entry to record the under applied overhead:
	Accounts	Debit	Credit
	Cost of goods sold	$32,200
	Manufacturing overhead		$32,200
	(under applied overhead transferred to cost of goods sold account)
Ans. 4	To help control manufacturing overhead, managers compare the actual line item amounts for
	manufacturing overhead with the budgeted amounts. Managers will also investigate only large
	differences between actual and budgeted amounts to identify the reasons why actual costs
	are different from budgeted costs.