Question

3. Cartwright Company estimates that annual manufacturing overhead costs will be $380,000 Estimated annual operating activity bases are: direct labor cost $175,000, direct labor hours 40,000 and machine hours 80,000. The actual manufacturing overhead cost for the year was $387,500 and the actual direct labor cost for the year was $172,000. Actual direct labor hour:s totaled 38,500 and machine hours totaled 79,000. Cartwright applies overhead based on direct labor hours a. Compute the predetermined overhead rate per direct labor hour. b. Determine the amount of manufacturing overhead applied. c. Determine if overhead is over- or under-applied and the amount. d. Assume that Actual Manufacturing Overhead for the year was $300,000 and Applied Manufacturing Overhead was $305,000. Based on these numbers, what is the journal entry to correct the balance in the Manufacturing Overhead account at the end of the year?

Answer 1

a
Estimated annual manufacturing overhead	380000
Divide by Estimated Direct labor hours	40000
Predetermined overhead rate	9.50	per direct labor hour
b
Actual labor hours	38500
X Predetermined overhead rate	9.50
Manufacturing overhead applied	365750
c
Manufacturing overhead is under-applied
Actual Manufacturing overhead	387500
Less: Manufacturing overhead applied	365750
Under-applied manufacturing overhead	21750
d
Journal entry:
	Debit	Credit
Manufacturing overhead	5000		=305000-300000
Cost of goods sold		5000