Question

When setting its predetermined overhead application rate, Tasty Box Meals estimated its overhead would be $100,000 and would require 25,000 machine hours in the next year. At the end of the year, it found that actual overhead was $102,000 and required 26,000 machine hours. Determine the predetermined overhead rate. What is the overhead applied during the year? Prepare the journal entry to eliminate the underapplied or overapplied overhead.

Answer 1

Solution:-

Predetermined overhead Rate :- Estimated Overhead/Estimated Machine hours

:- $100000/25000 hours

:- $4 Per hour

:​Applied Overhead rate :- Actual Overhead/Actual Machine hours

:- $102000/26000 hour

:- $3.92 per hour

Journal entries of Over applied Overhead

Date	Particalars		Debit ($)	Credit ($)
	Manufacturing Overheads		2000
	Cost of goods sold			2000