Question

lkerd Company applies overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $300,000 for the year, and machine usage is estimated at 125,000 hours. For the year, $322,000 of overhead costs are incurred and 130,000 hours are used. Instructions (a) Compute the manufacturing overhead rate for the year (b) What is the amount of under-or overapplied overhead at December 31? (c) Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "7" . (a) Compute the manufacturing overhead rate for the year Estimated total overhead cost Estimated machine hours Ovemead rate Value Value (b) What is the amount of under-or overapplied overhead at December 31? Actual machine hours used Value Manufacturing overhead applied Manufacturing overhead incurred Value Manufacturing overhead over (under applied) (C) Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold Account Value Account Value After you have completed E2-5, consider the following additional question 1. Assume that the estimated total overhead tor the year changed to $350,000. Determine the impact on this change on the overhead rate, the amount of manufacturing overhead over(under) applied. Revise the joumal to dispose of over (under) applied overhead

Answer 1

a) Manufacturing overhead rate :

Estimated total overhead	$300000
Estimated machine hour	125000 machine hour
Overhead rate	$2.40 per machine hour

Calculate under or over applied overhead

Actual machine hour used	130000 Hour
Manufacturing overhead applied (130000*2.4)	$312000
Manufacturing overhead incurred	$322000
Manufacturing overhead over (under applied)	-$10000

Journal entry

Date	account and explanation	debit	credit
	Cost of goods sold	10000
	Manufacturing overhead		10000
	(To record under applied)

If estimated total overhead $350000

a) Manufacturing overhead rate :

Estimated total overhead	$350000
Estimated machine hour	125000 machine hour
Overhead rate	$2.80 per machine hour

Calculate under or over applied overhead

Actual machine hour used	130000 Hour
Manufacturing overhead applied (130000*2.8)	$364000
Manufacturing overhead incurred	$322000
Manufacturing overhead over (under applied)	$42000

Journal entry

Date	account and explanation	debit	credit
	Manufacturing overhead	42000
	Cost of goods sold		42000
	(To record over applied)