Question

Granite Company uses a job-order costing system. The company applies manufacturing overhead to jobs using a predetermined overhead rate based on direct labor-hours. Last year, manufacturing overhead and direct labor-hours were estimated at $80,000 and 16,000 hours respectively, for the year. In June, Job #315 was completed. Materials costs on the job totaled $1,500 and labor costs totaled $2,400 at $6 per hour. At the end of the year, it was determined that the company worked 15,000 direct labor-hours for the year and incurred $78,000 in actual manufacturing overhead costs.

e. Post both the Actual and Applied Overhead to the Manufacturing overhead control T-account.
f. Prepare the Journal entry to close under- or over-applied overhead to COGS.
g. What is the impact of the under- or over-applied overhead to the income statement?
h. How much should the company charge per unit if the company requires a 35% profit?

Answer 1