Westin Watercraft%u2019s predetermined overhead rate for year 2011 is 200% of di

Question

Westin Watercraft%u2019s predetermined overhead rate for year 2011 is 200% of direct labor. Information on the company%u2019s production activities during May 2011 follows.

The company incurred the following overhead costs during the month (credit Prepaid Insurance for expired factory insurance).

Applied overhead at month-end to the Goods in Process (Jobs 137 and 140) using the predetermined overhead rate of 200% of direct labor cost.

Prepare a job cost sheet for each job worked on during the month. (Omit the "$" sign in your response.)

Prepare journal entries to record the events and transactions a through j. (Omit the "$" sign in your response. )

Prepare a report showing the total cost of each job in process and prove that the sum of their costs equals the Goods in Process Inventory account balance. Prepare similar reports for Finished Goods Inventory and Cost of Goods Sold. (Omit the "$" sign in your response.)

a. Purchased raw materials on credit, $260,000. b. Paid $130,200 cash for factory wages. c. Paid $16,000 cash to a computer consultant to reprogram factory equipment. d. Materials requisitions record use of the following materials for the month.

Explanation / Answer

1. Determine the predetermined overhead rate for year 2009.
$1,500,000 / $1,250,000 = 120% of Direct labor cost

2. Set up a T-account for Factory Overhead and enter the overhead costs incurred and the amounts
applied to jobs during the year using the predetermined overhead rate.

Manufacturing Overhead
_______________________________________%u2026
Cash $1,660,000 WIP Inventory $1,644,000
_______________________________________%u2026

3. Determine whether overhead is over-applied or under-applied (and the amount) during the year.
Overhead Applied $1,644,000
Less: Actual overhead $1,660,000
Overhead under applied $16,000

4. Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold.
_______________________________________%u2026
Cost of goods sold $16,000
Manufacturing Overhead $16,000
_______________________________________%u2026

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