Question

Martinez Foundry uses a predetermined overhead allocation rate to allocate overhead to individual jobs, based on the machine hours required. (Click the icon to view the costs.) Read the requirements. Requirement 1. Compute Martinez' predetermined overhead allocation rate. Predetermined overhead allocation rate per machine hour Requirement 2. Prepare the journal entry to allocate manufacturing overhead. (Record debits first, then credits. Exclude explanations from any journal entries.) Date Accounts Debit Credit Dec. 31 Requirement 3. Post the manufacturing overhead transactions to the T-account and calculate the balance. (Enter the ending balance on the last line.) Manufacturing Overhead

Answer 1

1.

Predetermined overhead allocation rate = Estimated manufacturing overhead / Estimated machine hours

Predetermined overhead allocation rate = $900,000 / 75,000 = $12 per machine hour

2.

Date	Account	Debit	Credit
Dec.31	Work in process inventory (65,000*$12)	$780,000
	Manufacturing overhead		$780,000

3.

Manufacturing Overhead
Beg.Bal.	$0
Depreciation on manufacturing plant and equipment	580,000	$780,000	Work in process inventory
Property taxes on plant	38,000
Plant Janitor's wages	18,000
		$144,000	End.Bal.

Manufacturing overhead is overallocated by $144,000

4.

Date	Account	Debit	Credit
Dec.31	Manufacturing overhead	$144,000
	Cost of goods sold		$144,000

The entry decrease cost of goods sold.