Overhead Cost ABC Company manufactured 100,000 units in 2014 and reported the fo
ID: 2466204 • Letter: O
Question
Overhead Cost
ABC Company manufactured 100,000 units in 2014 and reported the following actual costs
Sandpaper $ 32,000
Leasing costs - plant $ 384,000
Materials handling (specialist) 320,000
Depreciation - equipment 224,000
Coolants & lubricants 22,400
Property taxes - equipment 32,000
Indirect manufacturing labor 275,200
Fire insurance - equipment 16,000
Direct manufacturing labor (general) ?
Direct material purchases 3,136,000
Direct materials, 1/1/2014 384,000
Direct materials, 12/31/2014 275,200
Finished goods, 1/1/2014 672,000
Sales revenue 12,800,000
Finished goods, 12/31/2014 1,280,000
Sales commissions 640,000
Work-in-process, 1/1/2014 96,000
Sales salaries 576,000
Work-in-process, 12/31/2014 64,000
Advertising costs 480,000
Administration costs 800,000
Other Relevant Information
The company used normal costing system and allocated the indirect cost based on direct labor cost.
Each unit required 2 hours of direct labor, the rate per hour is $10.88.
All purchases were on credit.
All salaries were accrued.
Material handling cost were performed by specialist workers.
Leasing costs are considered operational.
Fire insurance are paid in a monthly basis.
All other disbursement were paid in cash.
The amounts are totally and belong for 1 year.
Predetermine tax rate.
Required:
Using the information above, prepare all the necessary Journal Entries to record the Indirect Manufactured Cost for 2014.
Compute the amount of under or overallocated manufacturing overhead.
Explanation / Answer
Journal Entries to record the Indirect Manufacturing Costs:
Account Title / Explanations
Debit
Credit
Manufacturing Overhead
$ 32,000
Raw Material inventory
$ 32,000
(Being indirect material used for production)
Manufacturing Overhead
$ 384,000
Cash
$384,000
(Being lease rent for plant)
Manufacturing Overhead
$ 320,000
Cash
$320,000
(Being Cost incurred in factory)
Manufacturing Overhead
$ 224,000
Accumulated Depreciation - Equipment
$224,000
(Being depreciation recorded)
Manufacturing Overhead
$ 22,400
Raw Material inventory
$ 22,400
(Being indirect material used for production)
Manufacturing Overhead
$ 32,000
Cash
$ 32,000
(Being Expense incurred in factory)
Manufacturing Overhead
$ 275,200
Wages Payable
$275,200
(Being indirect labor used for production)
Manufacturing Overhead
$ 16,000
Cash
$ 16,000
(Being Expense incurred in factory)
Actual Indirect Manufacturing Costs :
Sandpaper
$ 32,000
Leasing costs - plant
$ 384,000
Materials handling (specialist)
$ 320,000
Depreciation - equipment
$ 224,000
Coolants & lubricants
$ 22,400
Property taxes - equipment
$ 32,000
Indirect manufacturing labor
$ 275,200
Fire insurance - equipment
$ 16,000
Total Actual Indirect Manufacturing Costs
$1,305,600
Direct manufacturing labor (general) 100000 Units *2 Hours *$10.88 =
$2,176,000
Journal Entries to record the Indirect Manufacturing Costs:
Account Title / Explanations
Debit
Credit
Manufacturing Overhead
$ 32,000
Raw Material inventory
$ 32,000
(Being indirect material used for production)
Manufacturing Overhead
$ 384,000
Cash
$384,000
(Being lease rent for plant)
Manufacturing Overhead
$ 320,000
Cash
$320,000
(Being Cost incurred in factory)
Manufacturing Overhead
$ 224,000
Accumulated Depreciation - Equipment
$224,000
(Being depreciation recorded)
Manufacturing Overhead
$ 22,400
Raw Material inventory
$ 22,400
(Being indirect material used for production)
Manufacturing Overhead
$ 32,000
Cash
$ 32,000
(Being Expense incurred in factory)
Manufacturing Overhead
$ 275,200
Wages Payable
$275,200
(Being indirect labor used for production)
Manufacturing Overhead
$ 16,000
Cash
$ 16,000
(Being Expense incurred in factory)
Actual Indirect Manufacturing Costs :
Sandpaper
$ 32,000
Leasing costs - plant
$ 384,000
Materials handling (specialist)
$ 320,000
Depreciation - equipment
$ 224,000
Coolants & lubricants
$ 22,400
Property taxes - equipment
$ 32,000
Indirect manufacturing labor
$ 275,200
Fire insurance - equipment
$ 16,000
Total Actual Indirect Manufacturing Costs
$1,305,600
Direct manufacturing labor (general) 100000 Units *2 Hours *$10.88 =
$2,176,000
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