Exercise 15-13 Pure Decorating uses a job order cost system to collect the costs

Question

Exercise 15-13 Pure Decorating uses a job order cost system to collect the costs of its interior decorating business. Each client's consultation is treated as a separate job. Overhead is applied to each job based on the number of decorator hours incurred. Listed below are data for the current year Estimated overhead Actual overhead Estimated decorator hours Actual decorator hours $920,000 $942,800 40,000 40,500 The company uses Operating Overhead in place of Manufacturing Overhead Compute the predetermined overhead rate Predetermined overhead rate per decorator hour s LINK TO TEXT Prepare the entry to apply the overhead for the year. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

Explanation / Answer

PREDERMINED OVERHEAD RATE = ESTIMATED OVERALL MANUFACTURING COST / ESTIMATED TOTAL UNITS IN ALLOCATION BASE

   9 20,000 /40000 HRS = 23

ESTIMATED OVERHEAD = $ 920000

ACTUAL OVERHEAD = $ 942800

SO UNDER APPLIED MANUFACTURING OVERHEAD $ 22800

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