Question

Alternate problem E Sullivan Company applied overhead to production using a predetermined overhead rate based on machine-hours. Budgeted data is: Budgeted machine-hours 75,000 Budgeted manufacturing overhead $870,000 a. Compute the predetermined overhead rate. b. Assume actual manufacturing overhead amounted to $997,500, and 86,000 machine-hours were used. Compute the amount of underapplied or overapplied manufacturing overhead and prepare the journal entry to transfer underapplied or overapplied overhead to Cost of Goods Sold.

Answer 1

a)	Predetermined overhead rate =
	budgeted MOH/Budgeted machine hours
	870,000/75,000
	11.6	per machine hours
b)	Applied manufacturing overhead    (11.6*86000)=					997600
	Actual manufacturing overhead					997,500
	Manufacturing overhead over applied					100
	Accounting titles & explanations				Debit	Credit
	Manufacturing overhead				100
	cost of goods sold					100