Determine the underapplied or overapplied overhead for the year. (Round predeter
ID: 2565100 • Letter: D
Question
Determine the underapplied or overapplied overhead for the year. (Round predetermined overhead rate to 2 decimal places.). Using the information below:
Ravsten Company uses a job-order costing system.
The company applies overhead cost to jobs on the basis of machine-hours. For the current year, the company estimated that it would work 35,000 machine-hours and incur $183,750 in manufacturing overhead cost. The following transactions occurred during the year:
a. Raw materials requisitioned for use in production, $309,000 (70% direct and 30% indirect).
b. The following costs were incurred for employee services:
c. Heat, power, and water costs incurred in the factory, $67,000.
d. Insurance costs, $30,000 (80% relates to factory operations, and 20% relates to selling and administrative activities).
e. Advertising costs incurred, $70,000.
f. Depreciation recorded for the year, $80,000 (75% relates to factory operations, and 25% relates to selling and administrative activities).
g. The company used 60,000 machine-hours during the year.
h. Goods that cost $500,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.
i. Sales for the year totaled $740,000. The total cost to manufacture these goods according to their job cost sheets was $495,000.
Required:
1. Determine the underapplied or overapplied overhead for the year. (Round predetermined overhead rate to 2 decimal places.).
Direct labor $ 180,000 Indirect labor $ 38,000 Sales commissions $ 30,000 Administrative salaries $ 45,000Explanation / Answer
Predetermined overhead rate = 183750/35000= 5.25 Overhead applied = 60000*5.25= 315000 Actual overhead =(309000*30%)+38000+67000+(30000*80%)+(80000*75%)= 281700 Overapplied overhead = 315000-281700= 33300
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