Question

Benner Company uses a job-order costing system and applies manufacturing overhead to jobs using a predetermined overhead rate based on direct labor hours. Manufacturing overhead and direct labor hours were estimated at $66,000 and 22,000 hours, respectively. In June, Job #461 was completed. Materials costs on the job totaled $4,923 and labor costs totaled $2,325 at $7.50 per hour (310 hours worked on this job). At the end of the year, it was determined that the company worked 23,975 direct labor-hours for the year and incurred $69,218.53 in actual manufacturing overhead costs.

Required (3 Points):

Compute the predetermined overhead rate and compute the amount of overhead applied to Job #461.

Job #461 contained 110 units. Determine the total product cost that would be charged to this job and the cost per unit of the product produced.

Compute the amount of overhead under or overapplied for Benner Company. Assuming the amount is not material, write the journal entry required to close the manufacturing overhead account at the end of the year.

Answer 1

a) Predetermine overhead rate = 66000/22000 = 3 per direct labour hours

b) Calculate total product cost and cost per unit :

Direct material	4923
Direct labour	2325
Manufacturing overhead applied (310*3)	930
Total product cost	8178
Units	110
Unit product cost	74.35

c) Applied overhead = 23975*3 = 71925

Actual overhead = 69218.53

Over applied overhead = 71925-69218.53 = 2706.47

Date	account & explanation	debit	credit
	Manufacturing overhead	2706.47
	Cost of goods sold		2706.47
	(To record over applied overhead)