Hammatt Inc. provides a variety of services for commercial clients. Hammatt dest
ID: 2451826 • Letter: H
Question
Hammatt Inc. provides a variety of services for commercial clients. Hammatt destroys any paper client records after seven years and the shredded paper is sold to a recycling company. The net realizable value of the recycled paper is treated as a reduction to operating overhead. The following data pertain to 2010 operations:
Budgeted operating overhead ………………………….$415,200
Actual operating overhead ……………………………..$410,500
Budgeted net realizable value of recycled paper ……… $9,200
Actual net realizable value of recycled paper …………. $9,700
Budgeted billable hours ……………………………….. 70,000
Actual billable hours …………………………………… 70,900
a. Assuming that number of billable hours is the allocation base, what was the company's predetermined overhead rate?
b. Record the journal entry for the sale of the recycled paper.
c. What was the company's underapplied or overapplied overhead for 2010? 34.
Explanation / Answer
a) Company's predetermined overhead rate= (Budgeted operating overhead-Budgeted net realizable value of recycled paper)/Budgeted billable hours
Company's predetermined overhead rate= (415200-9200)/70000
Company's predetermined overhead rate= $ 5.80 per hour
b)
c)What was the company's underapplied or overapplied overhead for 2010?
Overhead to be applied = Actual billable hours* Company's predetermined overhead rate
Overhead to be applied = 70900*5.80
Overhead to be applied = $ 411,220
Actual operating overhead = 415200
Actual net realizable value of recycled paper = $ 9700
Overapplied overhead = Overhead to be applied - (Actual operating overhead - Actual net realizable value of recycled paper )
Overapplied overhead = 411220 - (415200-9700)
Overapplied overhead = $ 5720
Account Title & Explaination Debit credit Cash 9700 Manufacturing Overhead 9700Related Questions
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