Duggan Company applies manufacturing overhead to jobs on the basis of machine ho

Question

Duggan Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $288,190 for the year, and machine usage is estimated at 125,300 hours. For the year, $306,310 of overhead costs are incurred and 131,200 hours are used.

For the year, $306,310 of overhead costs are incurred and 131,200 hours are used.

SHOW LIST OF ACCOUNTS

SHOW LIST OF ACCOUNTS

Account Titles and Explanation

Debit

Credit

For the year, $306,310 of overhead costs are incurred and 131,200 hours are used.

Explanation / Answer

A) Estimated Overheads $288,190 Estimated Machine Usage 125300 Hrs Manufacturing Overhead rate 2.30 per machine hour = Overhead / Machine hour Manufacturing Overhead rate is based on pre determined standard of overheards expected to be incurred and pre determined expected machine hours to be used It is a recovery rate which is applied to actual machine hour used B) Now , Actual Machine hour used is 131200 Overheads recovered during the year = Actual Machune Hour used x machinery overheard rate = 131200 x 2.30 = 301760 Actual Manufacturing overheads 306310 Overheads recovered 301760 Overheads Underapplied 4550 C) Particulars Debit Credit Cost of Goods sold 4550             Manufacturing Overheads 4550 We will use manufacturing overhead account to record under applied amount on manufacturing overheads

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