Question

Exercise 15-15 Factory overhead computed, applied, and adjusted LO P3, P4 At the beginning of the year, Custom Mfg. established its predetermined overhead rate by using the following cost predictions: overhead costs, $390,000, and direct materials costs, $300,000. At year-end, the company's records show that actual overhead costs for the year are $663,700. 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 $380.000 74.000 50,000 $504,000 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 over- or underapplied overhead to Cost of Goods Sold. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 and 3 Reg 4 Determine the predetermined overhead rate. Overhead Rate Choose Denominator: Choose Numerator: 1 Overhead Rate Overhead rate Reqi Req 2 and 3 >

Answer 1

1) Overhead rate

Choose numerator	/	Choose denominator	=	Overhead rate
Estimated overhead	/	Estimated material	=	Overhead rate
390000	/	300000	=	130% of material used

2&3) Factory overhead - T account

Actual overhead	663700	655200	Applied overhead (504000*1.3)
Balance	8500

Under applied overhead = $8500

4) Adjusting entry

Date	account and explanation	Debit	Credit
	Cost of goods sold	8500
	Factory overhead		8500