Exercise 15-14 Factory overhead computed, applied, and adjusted LO P3, P4 The fo

Question

Exercise 15-14 Factory overhead computed, applied, and adjusted LO P3, P4 The following Information applies to the questlons displayed below In December 2014, Custom Mfg established its predetermined overhead rate for jobs produced during year 2015 by using the following cost predictions: overhead costs, $400.000, and direct labor costs, $200,000. At year-end 2015, the company's records show that actual overhead costs for the year are $1,045,600. Actual direct labor cost had been assigned to jobs as follows S 390,000 Jobs completed and sold Jobs in finished goods inventory Jobs in work in process inventory Total actual direct labor cost S 518,000 References Exercise 15-14 Factory overhead computed, applied, and adjusted LO P3, P4 Section Break Required information U 6:58PM value ^ d 11/27/2017 0 Type here to search

Explanation / Answer

Answer 1 Predetermined overhead rate for year 2015 = Estimated Overhead cost / Estimated direct labour cost Predetermined overhead rate for year 2015 = $400000 / $200000 = $2 per direct labour dollar Answer 2 & 3 Determination of overhead cost incurred,overhead applied and overhead underapplied / overapplied Direct Labour cost Overhead rate Factory Overhead applied Factory Overhead Incurred Overapplied / (underapplied) overheads A B C=A*B D C-D Jobs Completed and sold $390,000 $2 $780,000 Jobs in finished goods inventory $71,000 $2 $142,000 Jobs in work in process inventory $57,000 $2 $114,000 $1,036,000 $1,045,600 -$9,600 Answer 4 Journal entry to allocate underapplied overheads on Dec.31 Account Titles and Explanation Debit Credit Cost of goods sold $9,600 Factory Overheads $9,600 (to record underapplied overheads charged to cost of goods sold)

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