Reference no: EM132546377

Gordon Company is highly automated and uses computerized controllers in manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of the time recorded to complete each job by the computerized controllers attached to each machine.

The following estimates were used in preparing the predetermined overhead rate at the beginning of the year:

Machine time in hours 4,000

Manufacturing overhead cost $230,000

A severe economic recession resulted in cutting back production and a buildup of inventory in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year:

Machine time in hours 3,150

Manufacturing overhead cost$228,000

Inventories at year-end:

Raw materials$20,000

Work in process$32,000

Finished goods$530,000

Cost of goods sold$428,000

Required:

Question 1. Compute the company's predetermined overhead rate for the year.

Question 2. Compute the underapplied or overapplied overhead for the year.

Question 3. Prepare the journal entry to show the disposal of under/overapplied overhead. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)