Question

At the beginning of the year, Custom Mfg established its predetermined overhead rate by using the following cost predictions: Overhead costs $140 000, and direct materials costs, $100,000. At year-end, the company's records show that actual overhead costs for the year are $727500 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 $30,000 74. DOO 59.000 $513,000 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. Reg1 Reg 2 and 3 Reg Determine the predetermined overhead rate. Overhead Rate Choose Numerator Choose Denominator Overhead Rate Overhead rate - Req 2 and 3 >

Answer 1

1. calculating the predetermined overhead rate

predetermined overhead rate = Estimated overhead/ Estimated Direct Material Cost

predetermined overhead rate= 140000/100000 = 140%

                                            

2&3. -     Calculation of Over applied or Under applied Overheads (Amounts in $)

Factory Overhead
Actual Overhead	727,500	718,200	Applied Overhead (513000 x140%)
Underapplied Overhead (Bal fig) (727,500-718,200)	$9,300

4. Adjusting entry to allocate the above underapplied overhead cost of goods sold

s.no	Particulars	Debit	credit
Dec 31	cost of goods sold	$9300
	Factory overhead		$9300