Question

Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $348,189 for the year, and machine usage is estimated at 125,700 hours.

For the year, $444,755 of overhead costs are incurred and 131,500 hours are used.

Compute the manufacturing overhead rate for the year. (Round answer to 2 decimal places, e.g. 1.25.)

What is the amount of under- or overapplied overhead at December 31?

Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.

Answer 1

	1)	manufacturing overhead rate
		Estimated overhead costs/estimated machine usage
		348,189/125,700
		2.77	per machine hour
	2)	Actual manufacturing overhead incurred					444,755
		MOH applied		(2.77*131,500)=			355050
		overhead under applied					89,705
	3)	Adjusting entry
		General Journal				Debit	Credit
		Cost of goods sold				89,705
		Manufacturing overhead					89,705