Question

At the beginning of the year, Custom Mfg. established its predetermined overhead rate by using the following cost predictions: overhead costs, $640,000, and direct materials costs, $200,000. At year-end, the company's records show that actual overhead costs for the year are $1,614,600. Actual direct materials cost had been assigned to jobs as follows. Jobs completed and sold Jobs in finished goods inventory Jobs in work in process inventory Total actual direct materials cost $370,000 81,000 51,000 $502,000 1. Determine the predetermined overhead rate. 2&3. Enter the overhead costs incurred and the amounts applied to jobs during the year using the predetermined overhead rate and determine whether overhead is overapplied or underapplied. 4. Prepare the adjusting entry to allocate any ove or underapplied overhead to Cost of Goods Sold. Req 1 Req 2 and 3 Req 4 Determine the predetermined overhead rate. Overhead Rate 1 Choose Denominator: Choose Numerator: Overhead Rate Overhead rate Req1 Req 2 and 3 Enter the overhead costs incurred and the amounts applied during the year using the predetermined overhead rate and determine whether overhead is overapplied or underapplied. Factory Overhead Reql Roq 2 and 3 Reg 4 Reg 4 Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold. View transaction list Journal entry worksheet Record entry to allocate underapplied /overapplied overhead. Note: Enter debits before credits Date General Journal Debit Credit Dec 31

Answer 1

1) Predetermine overhead rate

Choose numerator	/	Choose denominator	=	Predetermine overhead rate
Estimated overhead	/	Estimated material	=	Predetermine overhead rate
640000	/	200000	=	320% of material cost

2) T account

Actual overhead	1614600	1606400	Applied overhead (502000*3.2)
Balance	8200

Under applied overhead = $8200

4) Adjusting entry

Date	account and explanation	Debit	credit
	Cost of goods sold	8200
	Manufacturing overhead		8200
	(To record under applied overhead)