Question

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
Indirect costs
Indirect labor		2,510
Indirect materials		3,440
Factory rent		3,280
Factory supervision		4,770
Factory depreciation		5,720
Factory janitorial work		1,130
Factory insurance		1,790
General and administrative salaries		4,120
Selling expenses		5,300
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.

Answer 1

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