Question

Return to question Problem 2-4A Overhead allocation and adjustment using a predetermined overhead rate LO P3, P4 points In December 2016, Learer Company's manager estimated next year's total direct labor cost assuming 50 persons working an average of 2,000 hours each at an average wage rate of $25 per hour. The manager also estimated the following manufacturing overhead costs for 2017. Indirect labor Factory supervision Rent on factory building Factory utilities Factory insurance expired Depreciation-Factory equipment Repairs expense-Factory equipment Factory supplies used Miscellaneous production costs Total estimated overhead costs $ 319,200 240,000 140,000 88,000 68,000 480,000 60,000 68,800 36,000 $1,500,000

Answer 1

1-a Predetermined Overhead rate Estimated Overhead Costs Estimated Direct Labor costs Predetermined Overhead rate 1,500,000 25,00,000 Predetermined Overhead rate 60% Working Notes: Estimated Direct labor costs (50 persons x 2,000 hours * $ 25) 2,500,000 1.b)Applied Overhead Cost Job 201: (604,000 x 60%) Job 202 : (563,000 x 60%) Job 203: (298,000 x 60%) Job 204 : (716,000 x 60%) Job 205: (314,000 x 60%) Job 206: (17,000 x 60%) Total Overhead Applied 362,400 337,800 178,800 429,600 188,400 10,200 1,507,200 1.c) Factory Overhead 1,520,000 Actual Overhead Costs 1,507,200 Applied Overhead costs Underapplied Overhead 12,800 Debit Credit 2) Allocation of Underapplied Overhead costs General Journal Cost of goods sold Factory Overhead 12,800 12,800