Question
Harwood Company uses a job-order costing system that applies overhead cost to jobs on the basis of machine-hours. The company's predetermined overhead rate of $2.50
Harwood Company uses a job-order costing system that applies overhead cost to jobs on the basis of machine-hours. The company's predetermined overhead rate of $2.50 per machine-hour was based on a cost formula that estimates $202,500 of total manufacturing overhead for an estimated activity level of 81,000 machine-hours. Required:
1. Assume that during the year the company works only 76,000 machine-hours and incurs the following costs in the Manufacturing Overhead and Work in Process accounts: Compute the amount of overhead cost that would be applied to Work in Process for the year and make the entry in your T-accounts.
2A. Compute the amount of underapplied or overapplied overhead for the year and show the balance in your Manufacturing Overhead T-account. 2B. Prepare a journal entry to close the company's underapplied or overapplied overhead to Cost of Goods Sold.
\begin{tabular}{|l|r|l|l|} \hline \multicolumn{4}{|c|}{ Manufacturing Overhead } \\ \hline \multicolumn{2}{|c|}{ Debit } \\ \hline (Maintenance) & 22,000 & \multicolumn{2}{|c|}{ Credit } \\ \hline (Indirect materials) & 8,100 & & (a) \\ \hline (Indirect labor) & 65,000 & & \\ \hline (Utilities) & 35,000 & & \\ \hline (Insurance) & 7,100 & & \\ \hline (Depreciation) & 57,000 & & \\ \hline Balance & & & \\ \hline \hline \end{tabular} Work in Process \begin{tabular}{|l|r|l|l|} \hline \multicolumn{2}{|c|}{ Debit } \\ \hline (Direct materials) & 720,000 & \multicolumn{2}{c|}{ Credit } \\ \hline (Direct labor) & 91,000 & & \\ \hline (Overhead) (a) & & & \\ \hline \end{tabular} manufacturing overhead Record the entry to close the balance of the manufacturing overhead account to COGS account. Note: Enter debits before creditsStep by Step Solution
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