Reference no: EM131663794

Question: Accounting for manufacturing overhead. Creative Woodworking uses normal costing and allocates manufacturing overhead to jobs based on a budgeted labor-hour rate and actual direct labor-hours. Under- or overallocated overhead, if immaterial, is written off to Cost of Goods Sold. During 2017, Creative recorded the following:

Budgeted manufacturing overhead costs         $4,140,000

Budgeted direct labor-hours                              180,000

Actual manufacturing overhead costs             $4,337,000          

Actual direct labor-hours                                 189,000

1. Compute the budgeted manufacturing overhead rate.

2. Prepare the summary journal entry to record the allocation of manufacturing overhead.

3. Compute the amount of under- or overallocated manufacturing overhead. Is the amount significant enough to warrant proration of overhead costs, or should Creative Woodworking write it off to cost of goods sold? Prepare the journal entry to dispose of the under- or overallocated overhead.