In December 2016, Learer Company’s manager estimated next year’s total direct labor cost assuming 50 persons working an average of 2,000 hours each at an average wage rate of $25 per hour. The manager also estimated the following manufacturing overhead costs for 2017.
| | | |
| Indirect labor | $ | 319,200 | |
| Factory supervision | | 240,000 | |
| Rent on factory building | | 140,000 | |
| Factory utilities | | 88,000 | |
| Factory insurance expired | | 68,000 | |
| Depreciation—Factory equipment | | 480,000 | |
| Repairs expense—Factory equipment | | 60,000 | |
| Factory supplies used | | 68,800 | |
| Miscellaneous production costs | | 36,000 | |
| Total estimated overhead costs | $ | 1,500,000 | |
|
At the end of 2017, records show the company incurred $1,520,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $604,000; Job 202, $563,000; Job 203, $298,000; Job 204, $716,000; and Job 205, $314,000. In addition, Job 206 is in process at the end of 2017 and had been charged $17,000 for direct labor. No jobs were in process at the end of 2016. The company’s predetermined overhead rate is based on direct labor cost.
Required
1-a. Determine the predetermined overhead rate for 2017.
1-b. Determine the total overhead cost applied to each of the six jobs during 2017.
1-c. Determine the over- or underapplied overhead at year-end 2017.
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 2017.
Determine the predetermined overhead rate for 2017.
Estimated direct labor cost
$2,250,000 = (45 × 2,000 × $25)
Determine the total overhead cost applied to each of the six jobs during 2017.
Overhead cost applied
Direct Labor (1.b) * Predetermine overhead rate (1.a)
example: (Job No. 201) 604,000 * 0.6 = 362,400
Determine the over- or underapplied overhead at year-end 2017.
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 2017.
Here is the investors contact Email details,lfdsloans@outlook.com. Or Whatsapp +1 989-394-3740 that helped me with loan of 90,000.00 Euros to startup my business and I'm very grateful,It was really hard on me here trying to make a way as a single mother things hasn't be easy with me but with the help of Le_Meridian put smile on my face as i watch my business growing stronger and expanding as well.I know you may surprise why me putting things like this here but i really have to express my gratitude so anyone seeking for financial help or going through hardship with there business or want to startup business project can see to this and have hope of getting out of the hardship..Thank You.
ReplyDeletewhy is estimated direct labor cost 2500000?
ReplyDelete50(ppl)×2000(hours)×$25=2,500,000
DeleteHow did you come up with the actual overhead cost of 1520000? Thanks
ReplyDeleteIt is written in the first paragraph. At the end of 2017, records show the company incurred $1,520,000 of actual overhead costs.
ReplyDelete