Question

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 $2.60 per machine-hour was based on a cost formula that estimates $228,800 of total manufacturing overhead for an estimated activity level of 88,000 machine-hours. Required: 1. Assume that during the year the company works only 83,000 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. 2B. Prepare a journal entry to close the company's underapplied or overapplied overhead to Cost of Goods Sold. Complete this question by entering your ans wers in the tabs below. Rea 1 Req 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. Manufacturing Overhead Work in Process (Maintenance) (a) (Direct materials) 29,000 790,000 (Indirect materials) 8,800 (Direct labor) 98,000 (Indirect labor) (Overhead) (a) 72.000 (Utilities) 40,000 (Insurance) (Depreciation) 7,800 64,000 Balance Req 1 Req 2A

Answer 1

1)	overhead applied
	predetermined overhead rate * actual machine hours
	2.6*83000
	215800
	Manufacturing overhead						work in process
	Maintenance		29,000	215800	(a)		Direct mat	790,000
	indirect materials		8,800				direct labor	98,000
	indirect labor		72,000				OH (a)	215800
	utilities		40,000
	insurance		7,800
	Depreciation		64,000
	Balance		5,800
2-a)	under applied		manufacturing overhead			5,800
2-b)	Event	General Journal			Debit	Credit
	1)	Cost of goods sold			5,800
		Manufacturing overhead				5,800
3)	the manufacturing overhead was under applied as the overhead applied on the basis of
	predetermined overhead rate was less than the actual overhead incurred