Question

Selected cost data for Classic Poster, Co. are as follows: EEB Click the icon to view the cost data.) Read the requirements Requirement 1. Compute the predetermined overhead allocation rate per direct labor dollar. Predetermined overhead allocation rate Requirement 2. Prepare the journal entry to allocate overhead cost for the year. (Record debits first, then credits. Exclude explan from journal entries.) Date Accounts Debit Credit Dec. 31 Requirement 3. Use a T-account to determine the amount of underallocated or overallocated manufacturing overhead Start by posting the actual and allocated manufacturing overhead to the T-account. (Use the first available cell to post each amour input the balance in the T-account.) Manufacturing Overhead Manufacturing overhead is Requirement 4. Prepare the journal entry to adjust for the underallocated or overallocated manufacturing overhead. (Record deb then credits. Exclude explanations from journal entries.) Date Accounts Debit Credit Dec. 31 Data Table Estimated manufacturing overhead cost for the year Estimated direct labor cost for the year Actual manufacturing overhead cost for the year Actual direct labor cost for the year S 106,000 84,800 103,000 75,000 Print Done

Answer 1

1. Predetermined Overhead Allocation Rate = $\frac{Estimated Manufacturing Overheads}{Estimated Direct Labour Cost}$

= $\frac{106000}{ 84800}$

= 1.25 per direct Labour Dollar.

2. Allocated Manufacturing Overheads for the year = 75000*1.25

= 93750

Journal Entry

Wages & Salaries Control A/c Dr. 75000

To General Ledger Adjustment A/c 75000

(for direct labour cost incurred during the year)

Work in Progress Ledger Control A/c   Dr. 93750

To Manufacturing Overheads Control A/c 93750

(for allocation of manufacturing overheads)

3. Under/Over Absorption of Manufacturing Overheads

Actual Manufacturing Overheads = 103000

Absorbed Manufacturing Overheads = 93750

Therefore, Under Absorbed Overheads = Actual Overheads - Absorbed Overheads

= 103000 - 93750

= 9250

4. Journal Entry

Cost of sales A/c   Dr. 9250

To Factory Overheads Control A/c 9250

(For adjusting the under absorbed overhead)