Creek Company and Fort Company base their predetermined overhead rates on machine hours. The following information pertains to the companies' most recent accounting periods:
Creek Fort
Actual machine hours ................................................12,300....... 19,500
Estimated machine hours............................................. 12,000....... 20,000
Actual manufacturing overhead costs...........................$143,800.... .$318,000
Estimated manufacturing overhead costs....................... $144,000.... $320,000
Required
a. Compute the predetermined overhead rate for each company.
b. Determine the amount of overhead cost that would be applied to work in process for each company and compute the amount of over applied or under applied manufacturing overhead cost for each company.
c. Explain how closing the Manufacturing Overhead account would affect the Cost of Goods Sold account for each company.