Harwood Company uses a job-order costing system that applies overhead cost to jobs on the basis of machine-hours. The company's predetermined overhead rate of $2.60 per machine-hour was based on a cost formula that estimates $260,000 of total manufacturing overhead for an estimated activity level of 100,000 machine-hours.
Required:
1. Assume that during the year the company works only 95,000 machine-hours and incurs the following costs in the Manufacturing Overhead and Work in Process accounts: Compute the amount of overhead cost that would be applied to Work in Process for the year and make the entry in your T-accounts.
2A. Compute the amount of underapplied or overapplied overhead for the year and show the balance in your Manufacturing Overhead T-account.
2B. Prepare a journal entry to close the company's underapplied or overapplied overhead to Cost of Goods Sold.
1) | ||||
Overhead would be applied | ||||
=$2.60 per machiner hour *95000 machine hours | ||||
=$247000 | ||||
Debit | Credit | |||
Job Work In progress | $ 2,47,000 | |||
Manufacturing Overhead | $ 2,47,000 | |||
(to apply overhead to WIP) | ||||
2A) | Unedrapplied overhead | |||
Budgeted overhead | $ 2,60,000 | |||
Applied Overhead | $ 2,47,000 | |||
Under-applied | $ 13,000 | |||
Manufacturing Overhead | ||||
Overhead Costs | $ 2,60,000.00 | Work In Progress | $ 2,47,000.00 | |
Balance | 13000 | |||
2B) | ||||
Debit | Credit | |||
Cost of good sold | $ 13,000 | |||
Manufacturing overhead | $ 13,000 | |||
( to record under applied overhead) | ||||
Harwood Company uses a job-order costing system that applies overhead cost to jobs on the basis...
Harwood Company uses a job-order costing system that applies overhead cost to jobs on the basis of machine hours. The company's predetermined overhead rate of $2.60 per machine-hour was based on a cost formula that estimates $260,000 of total manufacturing overhead for an estimated activity level of 100,000 machine-hours. Required: 1. Assume that during the year the company works only 95,000 machine-hours and incurs the following costs in the Manufacturing Overhead and Work in Process accounts: Compute the amount of...
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