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Aspen Company estimates its manufacturing overhead to be $553,300 and its direct labor costs to be...

Aspen Company estimates its manufacturing overhead to be $ 553,300 and its direct labor costs to be $ 503,000 for year 2. Aspen worked on three jobs for the year. Job 2-1, which was sold during year 2, had actual direct labor costs of $ 370,000. Job 2-2, which was completed, but not sold at the end of the year, had actual direct labor costs of $ 222,000. Job 2-3, which is still in work-in-process inventory, had actual direct labor costs of $ 148,000. Actual manufacturing overhead for year 2 was $ 801,100. Manufacturing overhead is applied on the basis of direct labor costs.

Required:

Prepare an entry to allocate over-or underapplied overhead to Work in Process, Finished Goods and Cost of Goods Sold. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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Answer #2

The first answer wasn't way off.


POHR (Predetermined Overhead Rate):

Estimated Overhead Cost / Estimated Allocation Base (Direct Labor Cost)

                           553,300 / 503,000 = 1.10 or 110%


Applied Overhead:

740,000* x 110% = 814,000


*The 740,000 is acquired by the sum of the Jobs: 

  Job 2-1: 370,000

  Job 2-2: 222,000

  Job 2-3: 148,000

             = 740,000


Actual Manufacturing Overhead is given: 801,100.


Under or Over- Applied Manufacturing Overhead:

Actual Manufacturing Overhead801,100
Less: Manufacturing Overhead Applied 814,000
Overapplied Manufacturing Overhead

12,900

*Note: It is overapplied because the Manufacturing Overhead Applied is higher than the Actual Manufacturing Overhead. It would be Underapplied if the Actual Manufacturing Overhead would be higher than the Manufacturing Overhead Applied.


Journal Entry Calculations:


1. 

Job 2-1$370,000*110%= $407,000

Job 2-2

$222,000*110%= $244,200
Job 2-3$148,000*110%= $162,800


2. 

Job 2-1: (407,000/ 814,000)* 12,900 = 6,450

Job 2-2: (244,200/ 814,000)* 12,900 = 3,870

Job 2-3: (162,800/ 814,000)* 12,900 = 2,580


3. Worksheet

General JournalDebit

Credit

Applied Manufacturing Overhead814,000
       Cost of Goods Sold 
6,450
       Finished Goods Inventory
3,870
       Work-In-Process Inventory
2,580
       Manufacturing Overhead Control
801,100


source: University
answered by: anonymous
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Answer #1

Overhead rate = 553300/503000 = 110% of labor cost

Applied overhead = 740000*1.1 = 814000

Actual overhead = 801000

Over applied overhead = 814000-801000 = 13000

Transaction General journal Debit Credit
Manufacturing overhead 13000
Cost of goods sold 6500
Finished goods 3900
Work in process 2600
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