Reference no: EM132927499
Question - Erkens Company uses a job costing system with normal costing and applies factory overhead based on machine hours. At the beginning of the year, management estimated that the company would incur $2,046,000 of factory overhead costs and use 62,000 machine hours.
Erkens Company recorded the following events during April:
-Purchased 218,000 pounds of materials on an account; the cost was $5.30 per pound.
-Issued 139,000 pounds of materials to production, of which 24,500 pounds were used as indirect materials.
-Incurred direct labor costs of $335,000 and $59,000 of indirect labor costs.
-Recorded depreciation on equipment for the month, $79,500.
-Recorded expired insurance costs for the manufacturing property, $5,400.
-Paid $10,400 cash for utilities and other miscellaneous items for the manufacturing plant.
-Completed Job H11 costing $9,400 and Job G28 costing $86,500 during the month and transferred them to the Finished goods inventory account.
-Shipped Job G28 to the customer during the month. The job was invoiced at 30% above cost.
-Used 11,500 machine hours during April.
Required -
1. Compute Erkens Company's predetermined overhead rate for the year.
2. Prepare journal entries to record the events that occurred during April.
3-a. Compute the amount of overapplied or underapplied overhead.
3-b. Prepare a journal entry to close overapplied or underapplied overhead into the cost of goods sold on April 30.