Question
n December 2016, Learer Companys manager estimated next years total direct labor cost assuming 45 persons working an average of 2,500 hours each at an
n December 2016, Learer Companys manager estimated next years total direct labor cost assuming 45 persons working an average of 2,500 hours each at an average wage rate of $20 per hour. The manager also estimated the following manufacturing overhead costs for 2017.
Indirect labor | $ | 330,200 | |
Factory supervision | 109,000 | ||
Rent on factory building | 151,000 | ||
Factory utilities | 99,000 | ||
Factory insurance expired | 79,000 | ||
DepreciationFactory equipment | 384,000 | ||
Repairs expenseFactory equipment | 71,000 | ||
Factory supplies used | 79,800 | ||
Miscellaneous production costs | 47,000 | ||
Total estimated overhead costs | $ | 1,350,000 | |
At the end of 2017, records show the company incurred $1,574,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $615,000; Job 202, $574,000; Job 203, $309,000; Job 204, $727,000; and Job 205, $325,000. In addition, Job 206 is in process at the end of 2017 and had been charged $28,000 for direct labor. No jobs were in process at the end of 2016. The companys predetermined overhead rate is based on direct labor cost. Required 1-a. Determine the predetermined overhead rate for 2017. 1-b. Determine the total overhead cost applied to each of the six jobs during 2017. 1-c. Determine the over- or underapplied overhead at year-end 2017. 2. Assuming that any over- or underapplied overhead is not material, prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold at the end of 2017.
1b)
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Determine the over- or underapplied overhead at year-end 2017.
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