Question

Exercise 3-9 Applying Overhead; T-accounts; Journal Entries (LO3-1, LO3-2, LO3-4) Harwood Company uses a job-order costing system that applies overhead cost to jobs on the basis of machine hours. The company's predetermined overhead rate of $2.50 per machine-hour was based on a cost formula that estimates $237,500 of total manufacturing overhead for an estimated activity level of 95,000 machine-hours. Required: 1. Assume that during the year the company works only 90,000 machine-hours and incurs the following costs in the Manufacturing Overhead and Work in Process accounts: Compute the amount of overhead cost that would be applied to Work in Process for the year and make the entry in your T-accounts 2A. Compute the amount of underapplied or overapplied overhead for the year and show the balance in your Manufacturing Overhead T-account. 28. Prepare a journal entry to close the company's underapplied or overapplied overhead to Cost of Goods Sold. Complete this question by entering your answers in the tabs below. Req 1 Rdg 2A Req 2B Compute the amount of overhead cost that would be applied to Work In Process for the year and make the entry in your T-accounts. Work in Process 860,000 105,000 (Direct materials) (Direct labor) (Overhead) (a) Manufacturing Overhead 36,000 9,500 75,000 44,000 8,500 56,000 (Maintenance) (Indirect materials) (Indirect labor) (Utilities) (Insurance) (Depreciation) Balance Reg 1 Req2A >

Answer 1

1) T account

Manufacturing overhead					Work in process
Maintenance	36000	2.5*90000 = 225000	a) Work in process		Direct material	860000
Indirect material	9500				Direct labor	105000
Indirect labor	75000				Overhead a)	225000
Utilities	44000
Insurance	8500
Depreciation	56000
Balance	4000

2a) Under applied overhead = 4000

2b) Journal entry

Date	account and explanation	Debit	Credit
	Cost of goods sold	4000
	Manufacturing overhead		4000
	(to record under applied overhead)