Reference no: EM132809455

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 $213,200 of total manufacturing overhead for an estimated activity level of 82,000 machine-hours.

Required:

Problem 1: Assume that during the year the company works only 77,000 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.

Problem 2: Compute the amount of underapplied or overapplied overhead for the year and show the balance in your Manufacturing Overhead T-account.

Problem 3: Prepare a journal entry to close the company's underapplied or overapplied overhead to Cost of Goods Sold.