Question

Pumpkin Plastic Products Company manufactures pipes and applies manufacturing costs to production at a budgeted indirect-cost rate of $9 per direct labor-hour. The following data are obtained from the accounting records for June 2014: Direct materials $300,000 Direct labor (16,000 hours @ $11/hour) $ 44,000 Indirect labor $ 20,000 Plant facility rent $ 100,000 Depreciation on plant machinery and equipment $ 40,000 Sales commissions $ 30,000 Administrative expenses $ 40,000 Required: a. What actual amount of manufacturing overhead costs was incurred during June 2014? b. What amount of manufacturing overhead was allocated to all jobs during June 2014? C. For June 2014, was manufacturing overhead underallocated or overallocated?

and d. what is the journal entry to write off the under/over allocated OH to COGS?

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Answer 1

All the indirect cost incurred for manufacturing of pipes in factory are included in manufacturing overhead cost . As in the given question , indirect labour cost , plant rent and depreciation included in manufacturing cost .

Sales commission and administrative expenses are not included in manufacturing overhead cost. As this costs are not incurred in factory during the process of manufacturing of pipes .

a) . Actual Manufacturing overhead cost :

= Indirect labour + Plant facility rent + Depreciation.

= $20000+$100000+$40000

=$ 1,60,000

b) . Allocated Manufacturing overhead .

= Direct labour Hours * Budgeted Indirect cost rate

= 16,000 hours * $9

= $1,44,000

c.) In June 2014

Actual Manufacturing overhead : $1,60,000

Budgeted Manufacturing overhead : $1,44,000

Manufacturing overhead allocated is less than actual Manufacturing overhead . Hence manufacturing overhead underallocated by $ 16,000

d) Journal Entry :

COGS. A/c To Manufacturing overhead A/c

$16000

$16000