Poblem 222A Predetermined Overhead Rate, Disposition of Underapplied or Overappl

Question

Poblem 222A Predetermined Overhead Rate, Disposition of Underapplied or Overapplied Overhead LO21 LO2-71 Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year Machine-hours Fixed manufacturing overhead cost Variable manufacturing overhead per computer-hour 8,000 $ 1,271,000 3.40 . During the year, a glut of furniture on the market resulted in cutting back production and a buildup of furniture in the company's s warehouse. The company's cost records revealed the following actual cost and operating data for the year Machine-hours Manufacturing overhead cost 963,000 50,000 Required: 1. Compute the company's predetermined overhead rate for the year. (Round your answer to 2 decimal places.) overhead rate per hour 2. Compute the underapplied or overapplied overhead for the year (Round your intermediate calculations to 2 decimal places.) 3. Assume the company closes any underapplied or overapplied overhead directy to Cost of Goods Sold Prepare the appropriate entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to 2 decimal places.) View transaction list Journal entry worksheet

Explanation / Answer

1 Variable manufacturing overheads 299200 (88000*3.4) Fixed manufacturing overheads 1271000 Total manufacturing overheads 1570200 Machine hours 88000 Predetermined overhead rate 17.84 2 Manufacturing overheads applied 892000 (50000*17.84) actual manufacturing overheads 963000 Under applied manufacturing overhead 71000 3 Journal entry Cost of goods sold 71000              Manufacturing overheads 71000

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