Question 2 uses a Job-order costing system with a plantwide overhead rate based

Question

Question 2 uses a Job-order costing system with a plantwide overhead rate based machine-hours. At the beginning of the year, the company made the follow estimates: 165,000 1,015,000 2.75 Machine-hours Fixed manufacturing overhead cost required to support estimated production cost per machine-hour Reguired: 1. Compute the predetermined overhead rate. 2. During the year Job A405 was started and completed. In addition to the above, the following information was available with respect to this job: Direct materials requisitioned Direct labor cost Machine-hours used $350 $730 Compute the total manufacturing cost assigned to Job A405 For Part 3, assume the Predetermined Overhead Rate (for machine-hours) was estimated at: $9.35 3a. During the year the company worked a total of 147,000 machine-hours on all jobs and incurred actual manufacturing overhead costs of $1,315,000. What is the amount of underapplied or overapplied overhead for the year? Is it under or over applied? 3b. If this amount were closed out entirely to Cost of Goods Sold, would the journal entry increase or decrease net operating income?

Explanation / Answer

Q2) 1) Predetermined overhead rate formula: estimated manufacturing overhead/estimated machine hours Variable manufacturing overhead rate per machine hour 2.75 FOH per machine hours (1,015,000/165,000)= 6.15 predetermined overhead rate 8.90 (note :predetermined overhead rate is rounded to two decimal figures) 2) total manufacturing cost assigned to Job A405 direct materials 350 direct labor 730 overhead applied (11*8.90) 98 total manufacturing cost assigned to Job A405 1178 answer 3)a) Actual manufacturing overhead 1,315,000 overhead applied (9.35*147000)          1,374,450 overhead over applied                59,450 answer 3b) journal entry would increase net operating income

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