Question

Job Order Costing Selected cost data for Vintage Print, Co. are as follows: Estimated manufacturing overhead cost for the year Estimated direct labor cost for the year Actual manufacturing overhead cost for the year Actual direct labor cost for the year $120,000 $100,000 S116,000 $76,000 1. Compute the predetermined overhead allocation rate per direct labor dollar 2. Prepare the journal entry to allocate overhead cost for the year. 3. Use a T-account to determine the amount of underallocated or overallocated manufacturing overhead. Manufacturing overhead is underallocated overallocated (place a square on the correct option) by S_ 4. Prepare the journal entry to adjust for the underallocated or overallocated manufacturing overhead.

Answer 1

Ans. 1	*Predetermined overhead rate   =   Budgeted overhead cost / Estimated Direct labor cost
	$120,000 / $100,000
	$1.20	per direct labor cost
Ans. 2	Overhead allocated = Actual direct labor cost * Predetermined overhead rate
	$76,000 * $1.20
	$91,200
	Journal entry:
	Particulars	Debit	Credit
	Work in process inventory	$91,200
	Manufacturing overhead		$91,200
	(To record the overhead applied)
Ans. 3	Manufacturing   overhead
	Particulars	Amount	Particulars	Amount
	Actual overhead	$116,000	Allocated overhead	$91,200
			Under allocated overhead	$24,800
		$116,000		$116,000
	Under allocated overhead = Actual overhead - Allocated overhead
	$116,000 - $91,200
	$24,800
	If the allocated overhead is less than the Actual overhead
	it means that the overhead is under allocated.
	Manufacturing overhead is under allocated by $24,800.
Ans.4	Journal entry to record the under applied overhead:
	Particulars	Debit	Credit
	Cost of goods sold	$24,800
	Manufacturing overhead		$24,800
	(To adjust the under allocated overhead)