Exercise 5-11 Applying Overhead in a Service Company; Journal Entries [LO4, LO5, LO7]

Creative Web Design uses a job-order costing system to track the costs of its web design projects. The company provides complete website design and hosting services. The following table provides data concerning the three design projects that were in process during May. There was no work in process at the beginning of May:

	Project
	Car City			Jans Flowers			Happy Daycare
Designer-hours		60			80			20
Direct labour cost	$	1,500		$	2,000		$	500

Actual overhead costs were $3,000 for May. Overhead costs are applied to projects on the basis of designer-hours. The predetermined overhead rate is $20 per designer-hour. The Car City and Jans Flowers projects were completed in May; the Happy Daycare project was not completed by the end of the month. No other jobs were in process during May.

Required:

1. Compute the amount of overhead cost that would have been charged to each project during May.

2. Prepare a journal entry showing the completion of the Car City and Jans Flowers projects and the transfer of costs to the Completed Projects (i.e., Finished Goods) account. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Journal entry worksheet

• Record the entry to transfer of costs to the Completed Projects.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
01

3. What is the balance in the Work in Process account at the end of the month?

4-a. What is the balance in the Overhead account at the end of the month?

4-b. What is this balance called?

multiple choice

• Underapplied overhead

• Overapplied overhead