Verizox Company uses a job order cost system with manufacturing
overhead applied to products based on direct labor hours. At the
beginning of the most recent year, the company estimated its
manufacturing overhead cost at $172,960. Estimated direct labor
cost was $454,480 for 18,400 hours.
Actual costs for the most recent month are summarized here:
|Item Description||Total Cost|
|Direct labor (1,840 hours)||$||45,449|
|Factory janitorial work||1,130|
|General and administrative salaries||4,120|
1., 2. & 3-a. Prepare the journal entries for overhead
1.Record the application of manufacturing overhead to production.
2.Record the actual manufacturing overhead cost incurred.
3. Record the transfer of manufacturing overhead account balance to cost of goods sold.
Predetermined Manufacturing Overhead rate = $172,960 18,400 hours = $9.40 per direct Labor Hour.
1. Entry for application of manufacturing overhead to production:
Actual direct labor hours = 1,840 hours.
Manufacturing Overhead applied = $9.40 x 1,840 hours = $17,296
2. Entry for Actual Manufacturing Overhead Incurred:
Actual Manufacturing Overhead = $2,510 + $3,440 + $3,280 + $4,770 + $5,720 + $1,130 + $1,790 = $22,640
3. Transfer of Under application of Manufacturing Overhead to Cost of Goods Sold:
Actual Manufacturing Overhead = $22,640
Applied Manufacturing Overhead = $17,296
Under Applied Manufacturing Overhead = $5,344
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