Medusa Products uses a job order costing system Overhead costs are applied to jobs on the basis of machine hours At the beginning of the year, management estimated that 85,000 machine hours would be required for the period's estimated level of production The company also estimated $106,250 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $0 75 per machine hour Required Compute the company's predetermined overhead rate Assume that during the year the company actually works only 80,000 machine hours and incurs the following costs in the Manufacturing Overhead and Work in Process accounts Copy the data in the T accounts above onto your answer sheet Compute the amount of over head cost that would be applied to Work in Process for the year, and make the entry in your T accounts Compute the amount of underapplied or overapplied overhead for the year, and show the balance in your Manufacturing Overhead T account Prepare a journal entry to close out the balance in this account to Cost of Goods Sold Explain why the manufacturing overhead was underapplied or overapplied for the year

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Posted on Jul 02, 2024

Medusa Products uses a job-order costing system. Overhead costs are applied to jobs on the basis of machine-hours. At the beginning of the year, management

Medusa Products uses a job-order costing system. Overhead costs are applied to jobs on the basis of machine-hours. At the beginning of the year, management estimated that 85,000 machine-hours would be required for the period's estimated level of production. The company also estimated $106,250 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $0.75 per machine-hour.

Required:

Compute the company's predetermined overhead rate.
Assume that during the year the company actually works only 80,000 machine-hours and incurs the following costs in the Manufacturing Overhead and Work in Process accounts:

Copy the data in the T-accounts above onto your answer sheet. Compute the amount of over- head cost that would be applied to Work in Process for the year, and make the entry in your T-accounts.

Compute the amount of underapplied or overapplied overhead for the year, and show the balance in your Manufacturing Overhead T-account. Prepare a journal entry to close out the balance in this account to Cost of Goods Sold.
Explain why the manufacturing overhead was underapplied or overapplied for the year.