Question

4. Verizox Company uses a job order cost system with manufacturing overhead applied to products based on direct labor hours. At the beginning of the most recent year, the company estimated its manufacturing overhead cost at $188,160. Estimated direct labor cost was $491,960 for 19,600 hours. Actual costs for the most recent month are summarized here: $ Total Cost 49,197 Item Description Direct labor (1,960 hours) Indirect costs Indirect labor Indirect materials Factory rent Factory supervision Factory depreciation Factory janitorial work Factory insurance General and administrative salaries Selling expenses 2,530 3,490 3,290 4,740 5,720 1,160 1,880 4,280 5,430 a. Record the application of manufacturing overhead to production. b. Record the actual manufacturing overhead cost incurred. C. Record the transfer of manufacturing overhead account balance to cost of goods sold.

Answer 1

Sol ution: Account title Debit Credit No. Work in process 18,816 manufacturing overhead 18,816 (Note 1) manufacturing overhead Cash, payables etc (Note 2) 22,810 22,810 cost of goods sold manufacturing overhead (Note 3) 3,994 3,994 Note 1: Predetemined overhead rate=Estimated MOH/Estimated DLH 9.60 188160/19600 Overhead applied =Actual DLH x Overhead rate 18,816 1500* 15 Note 2: Indirect labor 2,530 Indirect materials 3,490 Factory rent 3,290 Factory supervision 4,740 Factory depreciation Factory janitorial work Factory insurance 5,720 1,160 1,880 Actual manufacturing overhead cost 22,810 Note 3: Underapplied overhead=Actual overhead-overhead applied 3,994 22810-18816