Exercise 3.9 Applying Overhead;: T-accounts; Journal Entries [L03-1, LO3-2. LO3-

Question

Exercise 3.9 Applying Overhead;: T-accounts; Journal Entries [L03-1, LO3-2. LO3-4) on the basis of machine-hours. The companys head rate of $2.50 per machine-hour was based on a cost formula that estimates $240,000 of total manufacturing Harwood Company uses a job-order costing system that applies overhead c overhead for an estimated activity level of 96,000 machine-hours Required ost to jobs 1. Assume that during the year the com pany works only 91,000 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 th e amount of underapplied or overapplied overhead for the year and show the balance in your Manuf Overhead T-account 2B. Prepare a journal entry to close the company's underapplied or overapplied overhead to Cost of Goods Sold Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B 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. Work in Process 870,000 106,000 Manufacturing Overhead 37,000 9600 76,000 43,000 8,600 57,000 Direct materials) (Direct labor) (Overhead) (a) (Maintenance) Indrect materials) Indirect labor) (Utilities) (Insurance (Depreciation) Balance Req 2A

Explanation / Answer

Req 1. Actual machine hours worked 91000 OH rate per MH 2.5 Manufacturing Overheads applied 227500 Manufacturing Overheads Account Maintenance 37,000 Work in process inv. 227,500 Indirect Material 9,600 Indirect Labour 76,000 Utilities 43,000 Insurance 8,600 Depreciation 57,000 Balance 3,700 Work in process inventory Direct Material 870,000 Direct Labour 106,000 Manufacturing OH 227,500 Balance 1,203,500 Req 2-A: Under-applied Overheads Actual Mnaufacturing Overheads incurred 231200 (37000+9600+76000+43000+8600+57000) Less: Actual manufacturing OH applied 227500 Under-applied Overheads 3700 Req 2-b: Journal entry for under-applied OH: Cost of goods sold Dr. 3700      Manufacturing Overheads 3700

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