Question

Required information [The following information applies to the questions displayed below.] he following information pertains to Trenton Glass Works for the year just ended Budgeted direct-labor cost: 70,000 hours (practical capacity) at $16 per hour Actual direct-labor cost: 80,000 hours at $17.50 per hour Budgeted manufacturing overhead: $997,500 Actual selling and administrative expenses: 438,000 Actual manufacturing overhead: Depreciation Property taxes Indirect labor Supervisory salaries Utilities Insurance Rental of space Indirect material (see data below) $231,000 21,000 80,000 201,000 59,000 31,000 301,000 80,000 Indirect material: Beginning inventory, January 1 Purchases during the year Ending inventory, December 31 48,000 95,000 63,000

Answer 1

Ans:

1.

To calculate over or under applied overhead,, It require to calculate the predetermined overhead rate

Predetermined overhead rate=Budgeted Manufacturing Overhead/Budgeted Direct labour hours

=$997,500/70,000 Hours=$14.25

Calculation of the actual manufacturing overhead is shown below

Particulars	Amount	Amount
Depreciation		$231,000
Property taxes		$21,000
Indirect labour		$80,000
Supervisory Salaries		$201,000
Utilities		$59,000
Insurance		$31,000
Rental of Space		$301,000
Indirect Material
Beginning Inventory January 1	48000
Add: Purchases	95,000
Less: Ending Inventory December 31	-63,000
Indirect material Used		$80,000
Actual Manufacturing Overhead		$1004000

Applied Overhead

=Actual Manufacturing Overhead- Applied Manufacturing Overhead

=$1004,000-(14.25*80,000)=$1004,000-1140,000=-$136,000 (Over-Applied Overhead)

Here,The Manufacturing Overhead cost applied to work in process is more than the manufacturing overhead cost actually incurred during the period ,Therefore it is over-applied overhead.

Note:

If the manufacturing overhead cost applied to work in process is more than the manufacturing overhead cost actually incurred during a period then the difference is known as over applied overhead.

If the manufacturing overhead cost applied to work in process is less than the manufacturing overhead cost actually incurred during a period then the difference is known as under applied overhead.

2. Journal Entry to close out the manufacturing overhead account into cost of goods sold is shown below

Transaction	General Journal	Debit	Credit
1	Manufacturing Overhead	$136,000
	Cost of Goods Sold		$136,000
	(To record the entry to close out the
	Manufacturing overhead account)