Question

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The following information pertains to Trenton Glass Works for the year just ended.

Budgeted direct-labor cost: 70,000 hours (practical capacity) at $16 per hour

Actual direct-labor cost: 80,000 hours at $17.50 per hour

Budgeted manufacturing overhead: $997,500

Actual selling and administrative expenses: 438,000

Actual manufacturing overhead:
Depreciation	$	231,000
Property taxes		22,000
Indirect labor		81,000
Supervisory salaries		202,000
Utilities		57,000
Insurance		33,000
Rental of space		300,000
Indirect material (see data below)		81,000
Indirect material:
Beginning inventory, January 1		49,000
Purchases during the year		95,000
Ending inventory, December 31		63,000

1. Compute the firm’s predetermined overhead rate, which is based on direct-labor hours. (Round your answer to 2 decimal places.)

2. Calculate the overapplied or underapplied overhead for the year. (Round your intermediate calculations to 2 decimal places.)

3. Prepare a journal entry to close out the Manufacturing Overhead account into Cost of Goods Sold. (Round intermediate calculations to 2 decimal places. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

1
Budgeted manufacturing overhead	997500
Divide by Budgeted direct-labor hours	70000
Predetermined overhead rate	14.25
2
Depreciation	231000
Property taxes	22000
Indirect labor	81000
Supervisory salaries	202000
Utilities	57000
Insurance	33000
Rental of space	300000
Indirect material	81000
Actual manufacturing overhead	1007000
Overhead applied	1140000	=80000*14.25
Less: Actual manufacturing overhead	1007000
Underapplied overhead	133000	Underapplied
3
	Debit	Credit
Cost of Goods Sold	133000
Manufacturing Overhead		133000