Question
Ali Company manufactures unique furniture. The company has automated production and allocated overhead based on machine hours. Ali expects to incur $916,000 of manufacturing overhead
Ali Company manufactures unique furniture. The company has automated production and allocated overhead based on machine hours. Ali expects to incur $916,000 of manufacturing overhead costs and to use 88,000 machine hours during 2022. Ali had no beginning inventory. It recorded the following transactions during March.
1. Purchased direct materials (on account) for $77,000
2. Purchased indirect materials (on account) for $23,000
3. Incurred other manufacturing overhead cost (on account) for $1,000
4. Used direct materials - $10,000
5. Incurred direct labor costs- $41,000
6. Used $7,000 of the indirect materials (that was purchased in #2)
7. Allocated manufacturing overhead for march
The company actually used 1,000 machine hours in March.
a. Calculate the Pre-determined Manufacturing Overhead Rate.
b. Record the Journal Entries for the purchase of materials & overhead
C. Record the Journal Entries for use of direct materials, direct labor, and indirect materials (items #4, #5 & #6)
D. Record the Journal Entry for allocation of overhead and the journal entry to close the under or over-allocated balance of the overhead account.
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