Question

Check my work Exercise 15-15 Factory overhead computed, applied, and adjusted LO P3, P4 points In December 2016, Custom Mfg. established its predetermined overhead rate for jobs produced during 2017 by using the following cost predictions: overhead costs, $700,000, and direct materials costs, $500,000. At year-end 2017, the company's records show that actual overhead costs for the year are $707,100. Actual direct material cost had been assigned to jobs as follows. eBook Hint Jobs completed and sold Jobs in finished goods inventory Jobs in work in process inventory Total actual direct materials cost $360,000 81.000 57.000 $490.000 AK References 1. Determine the predetermined overhead rate for 2017 2&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.

Answer 1

1. Determine the predetermined overhead rate for 2017. Overhead Rate Choose Numerator: I Choose Denominator: Estimated overhead costs 1 Estimated direct material costs $700,000 1 $500,000 = Overhead Rate Overhead rate 140% 2&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 Actual overhead 707,100 697,200 Applied overhead Underapplied overhead 9,900 4. Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold. No Date General Journal Debit Credit 11 Dec 31 Cost of goods sold 9,900 Factory overhead 9,900

Explanation: Applied overhead = (Total actual direct materials cost * Overhead rate) = ($498,000 140%) = $697,200 Under-applied (over-applied) overhead Actual overhead Less: Applied overhead Under-applied (over-applied) overhead $707,100 697,200 $9,900