Dacosta Corporation had only one job in process on May 1. The job had been charg

Question

Dacosta Corporation had only one job in process on May 1. The job had been charged with $1,800 of direct materials, $6,966 of direct labor, and $9,936 of manufacturing overhead cost. The company assigns overhead cost to jobs using the predetermined overhead rate of $18.40 per direct labor-hour. During May, the following activity was recorded: Raw materials (all direct materials): Beginning balance $ 8,500 Purchased during the month $ 38,000 Used in production $ 39,300 Labor: Direct labor-hours worked during the month 1,900 Direct labor cost incurred $ 24,510 Actual manufacturing overhead costs incurred $ 33,300 Inventories: Raw materials, May 30 ? Work in process, May 30 $ 16,937 Work in process inventory on May 30 contains $3,741 of direct labor cost. Raw materials consist solely of items that are classified as direct materials. The entry to dispose of the underapplied or overapplied manufacturing overhead cost for the month would include a:

Multiple Choice credit of $5,336 to Manufacturing Overhead. credit of $1,660 to Manufacturing Overhead. debit of $5,336 to Manufacturing Overhead. debit of $1,660 to Manufacturing Overhead.

Explanation / Answer

Applied overhead = 18.40*1900 = 34960

Actual overhead = 33300

Overapplied overhead = 34960-33300 = 1660

Journal entry:

So answer is b) debit of $1,660 to Manufacturing Overhead.

Date account and explanation debit credit Manufacturing overhead 1660 Cost of goods sold 1660 (To record dispose of overapplied overhead)

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