Question

Moody Corporation uses a job-order costing system with a plantwide overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates:

    Machine-hours required to support estimated production . . . . . . 100,000

    Fixed manufacturing overhead cost . . . . . . . . . . . . . . . . . . . . . . . . $650,000

   Variable manufacturing overhead cost per machine-hour . . . . . . . $3.00

Required:    

1. Compute the predetermined overhead rate.  

2. During the year, Job 400 was started and completed. The following information was available with respect to this job:

    Direct materials requisitioned   . . . . . . . . . . . . . . . . . . . . . . . . . . . . $450

    Direct labor cost   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $210

    Machine-hours used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

    Compute the total manufacturing cost assigned to Job 400.

  

3. During the year, the company worked a total of 146,000 machine-hours on all jobs and incurred actual manufacturing overhead costs of $1,350,000. What is the amount of underapplied or overapplied overhead for the year? If this amount were closed out entirely to Cost of Goods Sold would the journal entry increase or decrease net operating income

Answer 1