Question
BIZ company produces chairs. There are 2 production departments which have following allocation bases for September: 8,700 machine-hours in Department P and 3,850 direct manufacturing
BIZ company produces chairs. There are 2 production departments which have following allocation bases for September: 8,700 machine-hours in Department P and 3,850 direct manufacturing labor-hours in Department Q. The budgeted manufacturing overheads for the month were $65,250 and $57,750, respectively. For Job A, the actual costs incurred in the two departments were as follows:
Department P Department Q
Direct materials purchased on account $125,000 $155,500
Direct materials used 42,500 18,500
Direct manufacturing labor 57,500 54,500
Indirect manufacturing labor 4,500 11,240
Indirect materials used 3,500 3,750
Lease on equipment 1,350 750
Utilities 1,200 1,050
Job A incurred 1,200 machine-hours in Department P and 950 manufacturing labor-hours in Department Q. The company uses a budgeted overhead rate for applying overhead to production.
Required:
a. Determine the budgeted manufacturing overhead rate for each department.
b. Prepare the necessary journal entries to summarize the September transactions for Department P.
c. How much overheads were allocated and actually incurred in both departments? For September were manufacturing overheads underallocated or overallocated?
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