Application of Factory Overhead
Tomek Company uses a job costing system that applies factory overhead on the basis of direct labor-hours. The company’s factory overhead budget for 2010 included the following estimates:
Budgeted total factory overhead | $568,000 |
Budgeted total direct labor-hours | 71,000 |
At the end of the year, the company shows these results:
Actual factory overhead | $582,250 |
Actual direct labor-hours | 71,500 |
The following amounts of the year’s applied factory overhead remained in the various manufacturing accounts:
| Applied Factory Overhead |
Work-in-process inventory | $139,000 |
Finished goods inventory | 216,840 |
Cost of goods sold | 200,160 |
Required
1. Compute the firm’s predetermined factory overhead rate for 2010.
2. Calculate the amount of overapplied or underapplied overhead.
3. Prepare a journal entry to transfer the underapplied or overapplied overhead to the Cost of Goods Sold account (do not use proration).
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