Question

Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $326,772 for the year, and machine usage is estimated at 125 200 hours For the year, $363,320 of overhead costs are incurred and 132,000 hours are used. Compute the manufacturing overhead rate for the year. (Round answer to 2 decimal places, eg. 1.52.) Manufacturing overhead rates per machine hour e Textbook and Media List of Accounts What is the amount of under or overapplied overhead at December 31? Manufacturing Overheads e Textbook and Media List of Accounts

Answer 1

Please find below the required answers and follow the steps :

1) We have to calculate the manufacturing overhead rate by dividing the overhead costs by machine hours.

2) Calculate the underapplied overhead

3) The underapplied overhead amount is posted against the cost of good sold account to reduce the profit.

1)

Particulars	Actuals
Overhead costs	$ 363,620
Machine hours	132000
Manufacturing overhead rate	$         2.75

2)

Under applied overhead

$      36,848

The formula for underapplied overhead
Actual manufacturing overhead costs-Budgeted manufacturing overhead costs

3)

Particulars	Debit	Credit
Cost of goods sold	$      36,848
To Manufacturing overhead account		$    36,848

Hope this helps.