At the beginning of the year, Learer Companys manager estimated total direct labor cost assuming 50 persons
Question:
At the beginning of the year, Learer Companys manager estimated total direct labor cost assuming 50 persons working an average of 2,500 hours each at an average wage rate of $20 per hour. The manager also estimated the following manufacturing overhead costs for the year.
Indirect labor | $ | 333,200 | |
Factory supervision | 128,000 | ||
Rent on factory building | 154,000 | ||
Factory utilities | 102,000 | ||
Factory insurance expired | 82,000 | ||
DepreciationFactory equipment | 494,000 | ||
Repairs expenseFactory equipment | 74,000 | ||
Factory supplies used | 82,800 | ||
Miscellaneous production costs | 50,000 | ||
Total estimated overhead costs | $ | 1,500,000 | |
At year-end, records show the company incurred $1,600,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $618,000; Job 202, $577,000; Job 203, $312,000; Job 204, $730,000; and Job 205, $328,000. In addition, Job 206 is in process at the end of the year and had been charged $31,000 for direct labor. No jobs were in process at the beginning of the year. The companys predetermined overhead rate is based on direct labor cost. Required 1-a. Determine the predetermined overhead rate for the year. 1-b. Determine the total overhead cost applied to each of the six jobs during the year. 1-c. Determine the over- or underapplied overhead at the year-end. 2. Assuming that any over- or underapplied overhead is not material, prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold at the end of the year.