Luzadis Company makes furniture using the latest automated technology. The compa

Question

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 81,000
  Fixed manufacturing overhead cost $ 1,272,000
  Variable manufacturing overhead per computer-hour $ 3.20

    During the year, a glut of furniture on the market resulted in cutting back production and a buildup of furniture in the company’s warehouse. The company’s cost records revealed the following actual cost and operating data for the year:

  
  Machine-hours 50,000
  Manufacturing overhead cost $ 1,021,000
  Inventories at year-end:
     Raw materials $ 440,000
     Work in process (includes overhead applied of 37,800) $ 110,000
     Finished goods (includes overhead applied of 264,600) $ 1,030,000
  Cost of goods sold (includes overhead applied of 642,600) $ 2,770,000

Required:

1.

Compute the company’s predetermined overhead rate for the year. (Round your answer to 2 decimal places.)

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 directly 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.)

4.

Assume that the company allocates any underapplied or overapplied overhead to Work in Process, Finished Goods, and Cost of Goods Sold on the basis of the amount of overhead applied during the year that remains in each account at the end of the year. These amounts are $37,800 for work in process, $264,600 for finished goods, and $642,600 for cost of goods sold. Prepare the journal entry to show the allocation for the year. (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.)

Explanation / Answer

1.the company’s predetermined overhead rate for the year=1272000 / 81000 hours = $15.70

2.the underapplied or overapplied overhead for the year= Actual overhead rate - predetermined overhead rate =

Actual overhead rate = 1021000 / 50000 = $20.42 per hour

underapplied overhead for the year = $20.42 - $15.70 = $4.72 per hour

Total Underapplied applied overhead for the year = 945000 / 15.7 * 4.72 = $284102

3. Total applied overhead for the year= $945000

Underapplied applied overhead = 945000 / 15.7 * 4.72 = $284102

Journal entry:

Debit Cost of goods sold $284102

Credit Under-applied manufacturing overhead $284102

4. Under applied overhead for work in process= $37,800 * 4.72 / $15.7 = $11364 ,

Journal entry:

Debit Work in Process- closing $11364

Credit Under-applied manufacturing overhead $11364

Under applied overhead for finished goods=$264,600 * 4.72 / $15.7 = $79549 ,

Journal entry:

Debit Finished Goods Inventory- closing $79549

Credit Under-applied manufacturing overhead $79549

Under applied overhead for cost of goods sold = $642,600 * 4.72 / $15.7 = $193189

Journal entry:

Debit Cost of goods sold    $193189

Credit Under-applied manufacturing overhead $193189

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.