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In December 2016, Learer Companys manager estimated next years total direct labor cost assuming 40 persons working an avera

Required 1-a. Determine the predetermined overhead rate for 2017. 1-b. Determine the total overhead cost applied to each of t

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Solution 1-a:
Estimated direct labor cost = 40*3000*$20 = $2,400,000
Predetermined Overhead rate
Estimated Overhead cost / Estimated direct labor cost
$1,800,000 / $2,400,000 = 75%
Solution 1-b:
Computation of Overhead cost Applied to Jobs
Job no. Direct Labor Overhead Cost applied (75%)
201 $         621,000 $                                   465,750
202 $         580,000 $                                   435,000
203 $         315,000 $                                   236,250
204 $         733,000 $                                   549,750
205 $         331,000 $                                   248,250
206 $           34,000 $                                     25,500
Total $      2,614,000 $                                1,960,500
Solution 1-c:
Factory Overhead
Actual Overhead 1979000 Applied 1960500
Balance (Under-applied) $18,500
Solution 2:
Journal Entries
Particulars Debit Credit
Cost of Goods sold Dr $18,500
       To Factory Overhead $18,500
(To allocate under applied overhead)
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