Question

Calculate and Use Overhead Rate Selected data for the consulting department of Kingman Consulting Inc., follow:...

Calculate and Use Overhead Rate

Selected data for the consulting department of Kingman Consulting Inc., follow:

Estimated consulting overhead cost for the year $558,000
Estimated direct labor cost for the year (@ $9/hr.) 324,000
Actual consulting overhead cost for May 29,000
Actual direct labor cost for May (2,400 hours) 22,000

Assuming that direct labor hours is the basis for applying consulting overhead,

a. Calculate the predetermined overhead rate per direct labor hour

b. Prepare a journal entry that applies consulting overhead for May.

General Journal
Description Debit Credit

work in process inventory

 Answer Answer

consulting overhead

 Answer Answer

c. By what amount is consulting overhead over-or under-applied in May?

Business   Accounting   
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Homework Answers

Answer #1

a.

Estimated direct labor hours = $324000/ 9 = 36000 hours

predetermined overhead rate = Estimated consulting overhead / Estimated direct labor hours = $558000 / 36000 = $15.50 per hour

b.

General Journal
Description Debit Credit
work in process inventory (2400*$15.50) 37200
      consulting overhead 37200

c.

consulting overhead over-or under-applied in May = Applied - actual overhead

= $37200 - 29000

= $8,200 Overapplied

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