Reference no: EM132925642

Question - Gamma company allocates overhead using direct labor hours as the cost driver. Information for the month of January is shown below:

1. Total estimated overhead at the beginning of the year was $1,600,000.

2. Gamma estimated that it would need 20,000 hours of direct labor for the year.

3. There were no jobs in process or in Finished Goods inventory at the start of the year.

4. There were 3 jobs started in January. None of these jobs had been completed as of the end of the month.

5. So far, Job 1 used 200 direct labor hours, job 2 used 300 direct labor hours, and Job 3 used 400 direct labor hours.

6. Actual overhead for the month was $66,000.

a. Compute Gamma's overhead allocation rate.

b. Compute the overhead allocated to Jobs 1, 2, and 3.

c. Calculate the ending balance of the overhead account (include whether the account had a debit or credit balance). Was overhead over or under allocated?

d. Provide the journal entry to correct the overhead misallocation.