Question

In December 2016, Custom Mfg. established its predetermined overhead rate for jobs produced during 2017 by using the following cost predictions: overhead costs, $600,000, and direct materials costs, $200,000. At year-end 2017, the company's records show that actual overhead costs for the year are $1,629,500. Actual direct material cost had been assigned to jobs as follows. Jobs completed and sold Jobs in finished goods inventory Jobs in work in process inventory Total actual direct materials cost $400,000 81,000 59,000 $540,000 inces 1. Determine the predetermined overhead rate for 2017. 2&3. Enter the overhead costs incurred and the amounts applied during the year using the predetermined overhead rate and determine whether overhead is overapplied or underapplied. 4. Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 and 3 Reg 4 Determine the predetermined overhead rate for 2017 Overhead Rate Choose Denominator: Choose Numerator: 1 Overhead Rate Overhead rate 1

Answer 1

Solution: Part 1: Overhead rate Choose Numerator Choose Denominator = Overhead rate estimated overhead / Estimated direct material cost = Overhead rate 600000/ 200000 = 300.00%

Part 2&3 Actual overhead Factory overhead 1629500 1620000 Overhead applied (540000*300%) Underapplied overhead 9500 Part 4: Date Dec 31. Credit General Journal Cost of goods sold Factory overhead Debit 9500 9500