Problem 3

At the end of 2019, ABC Companys manufacturing inventory and expense accounts held the following costs.

	Work in Process Inventory	Finished Goods Inventory	Cost of Goods Sold
Direct Materials	P120,000	P190,000	P350,000
Direct Labor	P100,000	P250,000	P580,000
Factory Overhead	P60,000	P300,000	P480,000

Alonzos accountant applied overhead during the year using a budgeted rate of P8.40 per hour. At year end, they computed the actual rate of P10.00 per machine hour. The beginning balances of both work in process inventory and finished goods inventory were zero.

1. How many machine hours worked during 2019?
2. Was a factory overhead over or under applied for year? By how much?
3. Prorate the over or under applied overhead to the appropriate accounts.

Show solution for each number.