Question

The following information is available for Lock-Tite Company, which produces special-order security products and uses a job order costing system. April 30 May 31 $ $43,000 10,200 63,000 52,000 21,300 35,600 Inventories Raw materials Work in process Finished goods Activities and information for May Raw materials purchases (paid with cash) Factory payroll (paid with cash) Factory overhead Indirect materials Indirect labor Other overhead costs Sales (received in cash) Predetermined overhead rate based on direct labor cost 210,000 345,000 15,000 80,000 120,000 1,400,000 70% Determine whether there is over or underapplied overhead. Factory Overhead 215,000 Actual overhead Applied overhead 215,000

Answer 1

Actual overhead. factory Overhead $ 219,000 $185,500 Applied overhead Underapplied overhead $ 29,500 Transaction General Journal Debit credit cost of goods sold $ 29,500 factory overhead $29,500 (to close underapplied overhead) Calculation: Cost of direct labor Total factory payroll - Indirect labor $ 345,000 - $ 80,000 - $265,000 factory overhead cost of direct labor & 70% Predetermined overhead rate $265,000 X 70%. = $ 185,500 Indirect Materials Indirect labor other overhead costs Total actual overhead incurred Overhead applied Underappsied overhead $ 15,000 $80,000 $ 120,000 $ 215,000 $(185, soo) 1$ 29,500