Question

In December 2016, Custom Mfg. established its predetermined overhead rate for jobs produced during 2017 by using the following cost predictions: overhead costs, $750,000, and direct materials costs. $625,000. At year-end 2017, the company's records show that actual overhead costs for the year are $830,000. Actual direct material 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 $513.750 102,750 68, see 5685.000 1. Determine the predetermined overhead rate for 2017 28 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. 4. Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold. Complete this question by entering your answers in the tabs below. Reg 1 keq 2 and 3 Reg 4 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 < Reg 1 Reg 4 >

Answer 1

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Solution: / = Estimated overhead 750000 Estimated direct Mat. costs 625000 Overhead rate 120% 2&3) Factory Overhead | 830000 822000 Applied overhead Actual overhead (685000*120%) Underapplied overh_ 8000 4) Naming convention and format is not available, can be slightly different: Credit Date Dec.31 Journal Entries Account title and explaination Cost of goods sold Factory overhead (To close the underapplied overhead to COGS) Debit $ 8,000 $ 8,000