Question

Vaughn Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are estimated to total $295,395 for the year, and machine usage is estimated at 125,700 hours.

For the year, $316,040 of overhead costs are incurred and 130,400 hours are used.

Compute the manufacturing overhead rate for the year. (Round answer to 2 decimal places, e.g. 1.25.)

Manufacturing overhead rate

$

per machine hour

What is the amount of under- or overapplied overhead at December 31?

Manufacturing Overhead

$                                                                         Overapplied or Underapplied?

Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.

Answer 1

Manufacturing Overhead rate

= Estimated overhead/Estimated machine hours

= 295,395/125,700

= 2.35 per machine hour

.

Applied overhead = 2.35*130,400 = 306,440

Actual overhead = 316,040

Overhead is underapplied by 9,600

.

Cost of Goods Sold	9,600
Manufacturing overhead		9,600