Question
HD Manufacturing uses a job costing system, and manufacturing overhead is applied on the basis of direct labour hours. At the beginning of the year,
HD Manufacturing uses a job costing system, and manufacturing overhead is applied on the basis of direct labour hours. At the beginning of the year, management estimated that the company would incur $1,200,000 of manufacturing overhead costs and incur 80,000 direct labour hours.
The following incomplete information is provided in relation to HD Manufacturing for the month of June:
(i) The actual labour rate is $20 per hour. A total of 6,500 labour hours were worked during normal working hours.Total cost of idle time incurred during the month was $4,250.
(ii) Jobs sold during the month were sold for $1,030,000 (credit sales). The cost of the goods soldduring the month was $728,000.
(iii) Depreciation on factory equipment incurred during June was $5,100.
(iv) Electricity costs and sundry manufacturing overhead costs incurred during June were $89,000.
i)Complete the T accounts providing the amounts of (a) to (l) to show the flow of costs through the company's manufacturing accounts (NB. No entry is required to close the amount of over/under applied overhead in this part of the question). (6 marks)
ii) Was manufacturing overhead under/over applied during June and by how much? Record the journal entry to close the under/over applied manufacturing overhead. (2 marks)
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