Ikerd Company applies manufacturing overhead to jobs on the basis of machine hou

Question

Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $326,772 for the year, and machine usage is estimated at 125,200 hours.

For the year, $363,320 of overhead costs are incurred and 132,000 hours are used.

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Account Titles and Explanation

Debit

Credit

Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $326,772 for the year, and machine usage is estimated at 125,200 hours.

For the year, $363,320 of overhead costs are incurred and 132,000 hours are used.

Explanation / Answer

1) Manufacturing overhead rate = $326,772 / 125,200 = $2.61 per machine hour

2) Manufacturing Overhead = $363,320 - (132,000 * $2.61) = $18,800 Underapplied

3)

Account Titles and Explanation Debit Credit Cost of Goods Sold $18,800 Manufacturing Overhead $18,800

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