Determine the over- or underapplied overhead at year-end

Reference no: EM13568657

In December 2010, Gomez Company's manager estimated next year's total direct labor cost assuming 50 persons working an average of 2,050 hours each at an average wage rate of $15 per hour. The manager also estimated the following manufacturing overhead costs for year 2011.


Indirect labor	$	173,825
Factory supervision		129,000
Rent on factory building		79,000
Factory utilities		44,900
Factory insurance expired		35,100
Depreciation-Factory equipment		243,000
Repairs expense-Factory equipment		31,500
Factory supplies used		34,800
Miscellaneous production costs		13,000

Total estimated overhead costs	$	784,125

At the end of 2011, records show the company incurred $747,482 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $347,000; Job 202, $338,000; Job 203, $177,000; Job 204, $426,000; and Job 205, $189,000. In addition, Job 206 is in process at the end of 2011 and had been charged $11,200 for direct labor. No jobs were in process at the end of 2010. The company's predetermined overhead rate is based on direct labor cost.

Required
1a.	Determine the predetermined overhead rate for year 2011. (Omit the "%" sign in your response.)

Predetermined overhead rate

1b.	Determine the total overhead cost applied to each of the six jobs during year 2011. (Omit the "$" sign in your response.)

Job No.	Applied Overhead
201	$
202
203
204
205
206

Total	$

1c.	Determine the over- or underapplied overhead at year-end 2011. (Input all amounts as positive values. Omit the "$" sign in your response.)

Overapplied overhead

2.	Assuming that any over- or underapplied overhead is not material, prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold at the end of year 2011. (Omit the "$" sign in your response.)

Date	General Journal	Debit	Credit
Dec. 31	Factory overhead
	Cost of goods sold

Explanation:

1a.

Predetermined overhead rate

Estimated overhead costs		$784,125		$784,125
	=		=		=	51%
Estimated direct labor cost		[50 × 2,050 × $15]		$1,537,500

1b.

Overhead costs charged to jobs

Job No.	Direct Labor		Applied Overhead(51%)
201	$	347,000	$	176,970
202		338,000		172,380
203		177,000		90,270
204		426,000		217,260
205		189,000		96,390
206		11,200		5,712

Total	$	1,488,200	$	758,982

1c. & 2.

Overapplied or underapplied overhead determination


Actual overhead cost	$	747,482
Less: Applied overhead cost		758,982

Overapplied overhead	$	11,500

Reference no: EM13568657

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