Question

In December 2010, Gomez Company’s manager estimated next year’s total direct labor cost assuming 50 persons working an average of 2,060 hours each at an average wage rate of $15 per hour. The manager also estimated the following manufacturing overhead costs for year 2011.

  

Indirect labor	$	164,150
Factory supervision		127,000
Rent on factory building		89,000
Factory utilities		45,400
Factory insurance expired		35,400
Depreciation—Factory equipment		249,000
Repairs expense—Factory equipment		30,500
Factory supplies used		34,500
Miscellaneous production costs		13,000
Total estimated overhead costs	$	787,950

  

At the end of 2011, records show the company incurred $744,559 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $355,000; Job 202, $337,000; Job 203, $172,000; Job 204, $419,000; and Job 205, $187,000. In addition, Job 206 is in process at the end of 2011 and had been charged $10,900 for direct labor. No jobs were in process at the end of 2010. The company’s predetermined overhead rate is based on direct labor cost.

  

Required
1a.	Determine the predetermined overhead rate for year 2011. (Omit the "%" sign in your response.)

  

Predetermined overhead rate

%

  

1b.	Determine the total overhead cost applied to each of the six jobs during year 2011. (Omit the "$" sign in your response.)

  

Job No.	Applied Overhead
201	$
202
203
204
205
206
Total	$

  

1c.	Determine the over- or underapplied overhead at year-end 2011. (Input all amounts as positive values.Omit the "$" sign in your response.)

  

(Click to select)Overapplied overheadUnderapplied overhead

$

  

2.	Assuming that any over- or underapplied overhead is not material, prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold at the end of year 2011. (Omit the "$" sign in your response.)

  

Date	General Journal	Debit	Credit
Dec. 31	(Click to select)Cost of goods soldSalesFinished goods inventoryGoods in process inventoryFactory payrollCashFactory overheadAccounts receivable
	(Click to select)CashCost of goods soldFactory OverheadGoods in process inventoryFactory payrollAccounts receivableFinished goods inventorySales

Answer 1

1

The predetermined overhead rate for year 2011

=Estimated overhead cost / direct labor Cost

=787,950 / (50*15*2060)

=51%

______________________________

2

Job No	Direct labor	Applied FOH 51%
	A	A*51%
201	355000	181050
202	337000	171870
203	172000	87720
204	419000	213690
205	187000	95370
206	10900	5559
Total	1480900	755259

________________________________________

3

the over- or underapplied overhead at year-end 2011

Actual Overhead cost	787950
Less: Overhead applied	755259
Underappled Overhead	32691

______________________________________

4

Date	Description	Debit $	Credit $
31-Dec	Cost of goods sold	32691
	Factory Overhead		32691